September 2024 was a month of rising optimism across global and local markets, driven by a range of economic events, Central Bank rate cuts, and investor sentiment gaining momentum. Both equity and fixed income markets saw notable shifts as Central Banks, particularly the US Federal Reserve, adopted a more accommodative stance to counter slowing economic growth. In South Africa, local market performance was influenced by similar global trends, with the South African Reserve Bank (SARB) also taking steps to lower interest rates in response to easing inflation.
On a global scale, Central Bank policy shifts were the dominant theme for September. The US Federal Reserve’s decision to reduce interest rates by 50 basis points was a pivotal moment, signalling the start of an easing cycle after over a year of aggressive tightening aimed at combating inflation. This move was motivated by weakening labour market data, with the US unemployment rate ticking up, and declining consumer confidence, which saw its largest drop in over three years. The Federal Reserve’s action was designed to provide support to the economy and prevent a deeper slowdown as inflationary pressures began to ease.
This rate cut had a pronounced effect on both equity and bond markets. In the equity space, developed market stocks posted strong gains, with the MSCI World Index rising by 1.83% and the MSCI Emerging Markets Index outperforming at 6.7%. US markets saw solid performance, with the NASDAQ 100 and S&P 500 climbing by 2.54% and 2.1%, respectively. Investors responded positively to the prospect of lower interest rates, which typically boost growth stocks and improve corporate earnings potential.
Globally, fixed income markets benefited from declining interest rate expectations, with government bonds and credit both delivering strong returns. The Bloomberg Global Aggregate Bond Index gained 1.7% in September. This marked a significant recovery for fixed income assets, which had been under pressure during the rate-hiking cycle. The European Central Bank (ECB) followed the Federal Reserve’s lead, cutting its deposit rate by 25 basis points to 3.5% in September, while the Bank of England maintained a steady course after a rate cut the previous month.
Commodities, however, experienced mixed results in September. While gold surged by 13%, driven by global uncertainty and the falling US Dollar, oil prices tumbled. Brent crude oil fell by 17% as concerns over slowing global demand outweighed supply-side constraints. The divergence between safe-haven assets like gold and more economically sensitive commodities like oil underscored the ongoing concerns about the strength of the global economic recovery.
Asia, particularly China, was a standout in terms of equity performance. Chinese indices, buoyed by government stimulus measures aimed at stabilizing the economy, posted impressive gains. The Hang Seng Index rose by 18.77%, while the Shanghai Composite surged by 18.6%. These gains reflected investor optimism about the effectiveness of policy interventions, despite continued uncertainty surrounding China’s economic outlook and ongoing challenges in the real estate sector.
South African markets followed global trends in September, with the local equity market benefiting from the SARB’s decision to lower interest rates by 25 basis points. This was the first rate cut since 2020 and provided much-needed relief to the economy, which had been grappling with high inflation and slow growth. The rate cut boosted investor sentiment, leading to gains across various sectors. The Johannesburg Stock Exchange (JSE) All Share Index (ALSI) rose by 4.04%, with mid-cap stocks outperforming, gaining 5.10%. The technology sector was a standout, rising by 13.91%, while the healthcare sector struggled, falling by 7.85%.
South African bonds also performed well in September, with the All Bond Index (ALBI) delivering a return of 3.86%, supported by declining yields on long-dated bonds. The SARB’s rate cut, combined with improving inflation data, helped support fixed income assets, and investors flocked to government bonds as yields compressed.
In the currency market, the South African Rand appreciated by 2.54% against the US Dollar, benefiting from both local and global monetary easing trends. This marked a positive reversal for the currency, which had been under pressure for much of 2024 due to global risk aversion and domestic economic challenges.
September 2024 was a month of optimism for global and local markets, largely driven by Central Bank interventions and improving inflation data. In the US and Europe, interest rate cuts helped propel equity markets higher, while fixed income assets benefited from falling yields. In South Africa, the SARB’s rate cut provided a much-needed boost to both equities and bonds, supporting investor sentiment. However, challenges remain, particularly in the commodities space, where oil prices continued to fluctuate amid concerns about global demand. As we move forward, the continuation of monetary easing policies, along with geopolitical and economic developments, will likely be key drivers of market performance in the final quarter of 2024.
Jacques de Kock
Quantitative Analyst & Portfolio Manager
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