Market Commentary
Q3 2024
The Markets
All three major U.S. indices posted quarterly gains, though the Nasdaq underperformed compared to the Dow and S&P 500. For the first time in a long while, the utility sector took the lead in performance, gaining 19.4% in Q3. Real estate, another key income sector, followed closely with a 16.3% gain for the quarter.
Digging deeper into the performance drivers for the quarter:
The summer period is traditionally quiet for markets and trading volumes are low which can lead to increased volatility, however, Q3 2024 was generally positive for equity and bond markets.
There was a short but significant correction in US equity valuations, which centred upon the large mega cap tech companies in August and the S&P 500 was down by 8.5% at that point but by the end of the quarter, there was a significant rebound in valuations and the S&P 500 was overall up by 5.5%.
Jobs data was positive, but showed signs of cooling, but not crumbling labour market: Following soft July and August employment reports, a pickup in hiring in September helped assuage any concerns the economy was sliding into recession. Jobs data in the fourth quarter are likely to be noisy given turbulent weather across the county, but on balance the unemployment rate is expected to stay near 4%.
China delivered a sizeable stimulus package to help support its economy and stock market: The People’s Bank of China (PBOC) and regulators delivered a series of policies mainly targeted at supporting its ailing property market. These measures included rate cuts to lending rates, mortgage rates and facilities to allow institutions to fund stock purchases.
Asset classes were positive across all markets as shown in the below chart
Performance of Major Asset Classes: Q3 2024
Percentage Performance
Source: Glenmede, FactSet
Fixed income delivered positive performance which was driven by the Feds decision on interest rates and the kicking off of its rate cutting cycle, the target rate range was cut by 0.50% to 4.75%-5.00% and indicated gradual rate reductions are expected through 2025. That said, the Fed will have to deliver on its promise, and given the committee’s sensitivity to incoming data, a diversified approach to investing should still deliver the best investment returns diversified.
Overall, this was a quarter in which there was a broadening of market gains across all asset classes and a diversification away from the mega-cap, tech stocks.
IP Model Portfolios – Performance commentary and fund changes
In the accumulation range, we made some fund changes which gave us a direct exposure to India through the Jupiter India fund and resulted in removing the Stewart Investors Asia Pacific fund. These changes were made to the moderately adventurous and adventurous portfolios as we believe India will deliver positive, long term growth
In the passive range, we switched our investments in global bond funds into UK Gilt funds as we believe they will outperform in the long term. All funds are managed by i-shares which give a good, cost-effective solution.
Across the income range, the performance was very strong, so the only change we made was to the Moderately Adventurous MPS where we increased our weighting to global equity via the Vanguard global equity income fund and reduced our exposure to the Lazard Emerging markets fund.
Martin Nelmes
Investment Director and Chairman of the Network Investment Committee
During Q3 2024, the IP MPS performed well throughout the range with its unfettered, diversified approach and bias to Global equities providing strong results.
The income models provided the best performance in the quarter as there was a wider set of positive returns from asset classes and an increase in funds providing a good income yield.
At the Investment Committee meeting in Q3 2024, the members assessed the performance and strategic aims of all portfolios and decided to implement minimal changes.
This document is aimed at Investment Professionals only and should not be relied upon by Private Investors. Our comments and opinion are intended as general information only and do not constitute advice or recommendation. Information is sourced directly from fund managers and websites. Therefore, this information is as current as is available at the time of production.
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