Investment Market update: December 2024

Find out how Donald Trump’s re-election and rising inflation across several regions affected stock market returns in November and what it could mean for your investments.

4 min read

Donald Trump’s re-election and rising inflation have influenced markets worldwide, shaping investor sentiment and economic trends across various regions.

Whilst this article focuses in the main on November 2024 market news, there are references to events and market performance from previous months.

US

November saw a slight uptick in US inflation, rising to 2.6% in the 12 months to October from 2.4% in September – marking the first increase since February¹.

In response to earlier signs of slowing inflation, the Federal Reserve continued its rate-cutting strategy, lowering the benchmark rate by 0.25 percentage points from 5% to 4.75% at the start of November².

However, with inflation rising again, and remaining above the 2% target, analysts predict the pace of further rate cuts may slow³.

US equities outperformed other regions significantly, as the S&P 500 surged by 5.9% in November, achieving its strongest monthly performance of the year⁴.

The strong market performance was driven by expectations for de-regulation after Trump’s re-election, which boosted the US financial and energy sectors.

UK

The latest figures from November show that UK inflation rose to 2.3% in the 12 months to October, up from 1.7% in September⁵.

In response to earlier trends, the Bank of England (BoE) reduced the base interest rate from 5% to 4.75% following their 7 November meeting⁶. However, with inflation once again exceeding the BoE's 2% target, further rate cuts, as with the US, could proceed at a slower pace⁷.

British wage growth excluding bonuses fell in the third quarter to its lowest level for more than two years. Average weekly earnings, meanwhile, were 4.8% higher in the three months to the end of September than a year earlier, but down from 4.9% the month before, boosting the BoE’s confidence that inflationary pressures will continue to ease⁸.

Equity markets performed positively during November, with the FTSE All-Share Index recording a gain of 2.5% for the month⁹.

Europe

Inflation also rose in the Eurozone, reaching 2.3% in the 12 months to November from 2% in October. On a national level, inflation in some countries, such as Spain and Germany, moved above the 2% target, while others, such as Italy, remained below it¹⁰.

The European Central Bank (ECB) cut interest rates in October by a quarter point to 3.25%¹¹. As with the US and the UK, further cuts are expected to be more gradual in response to rising levels of inflation¹².

A combination of concerns about US trade policy following Trump’s re-election, and earnings warnings from the automotive and consumer goods sectors contributed to Eurozone equities posting losses across November, with the MSCI Europe ex-UK falling by 0.1% over the month¹³.

Asia

In China, inflation in October rose by just 0.3%, marking its slowest pace in four months despite the large stimulus package introduced in September to help pull the country out of deflation¹⁴.

In Japan, inflation climbed to 2.2% in the 12 months to November, up from 1.8% in October. This has prompted some analysts to speculate that the Bank of Japan may consider raising interest rates above the current 0.25% at their next meeting¹⁵.

Asian markets faced negative pressure from a strengthening US dollar and concerns over a potentially less accommodative US monetary policy.

Japan’s TOPIX index declined by 0.5% in November, while the MSCI Asia ex-Japan index fell by 3.3%¹⁶. However, they remain strong performers in the year to date, growing by 15.8% and 12.3% respectively¹⁷.

What this means for you

Inflation has risen slightly above target levels in several regions, which could mean cash savings are more likely to lose their purchasing power over time. Arguably of more importance is that rising inflation could slow base rate cuts with central banks.

Investing in the market, particularly over longer time horizons, typically provides a better chance to outpace inflation than holding cash. While markets often experience short-term volatility, a well-diversified portfolio aligned with your financial goals can help preserve and grow your wealth amid inflationary pressures.

Moreover, market volatility in reaction to headline news such as Trump’s re-election is typically only temporary. So, although markets in Asia and Europe dipped during the month in response, it’s important to remember that occasional declines in value are a natural part of investing.

Rather than fixating on short-term fluctuations or reacting to headlines, you might be better served by staying focused on your personal goals and the long-term growth potential of your investments.

Please note: This guide is for general information only and does not constitute advice. The information is aimed at retail clients only.

The content of this guide was accurate at the time of writing. While information is considered to be true and correct at the date of publication, changes in circumstances, regulation, and legislation after the time of publication may affect the accuracy of the guide.

Sources:

FP2024-562

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