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Online Portfolios: Quarterly Review – Q2 2024

Economic and Market Overview

During Q2, the markets had to contend with political uncertainties, including ongoing challenges in Middle East, the death of Iranian President, Indian elections, US politics, French elections and the ramping up of election campaign as we approached UK elections on 4th July. The markets were relatively more volatile than the previous quarter amid changing macroeconomic factors and the expectations for the future path of interest rates as inflation softened in some parts of the world while remained sticky in others. The European Central Bank took the lead in cutting interest rates in June, a shift from nine months of stable rates. The Bank of England is expected to follow suite, however, the consensus for interest rate reduction in the US is expect to be in second half of the year, as policymakers do not expect it will be appropriate to reduce rates until they gain greater confidence that inflation is moving sustainably toward 2%.

During the second quarter, equity markets broadly followed the positive momentum set in the first quarter of 2024 amid softening inflationary pressures and signals from central banks that interest rates will possibly start falling in second half of 2024. However, the performance of equity markets varied across the globe. Both the US and UK equity markets (S&P 500 and FTSE 100) rose by 4.49% and 3.75%, respectively, mainly driven by improving macros, good corporate earnings, and resilient economies. DJ Islamic markets index, the benchmark for Shariah compliant equity investments, surged over 4% in the second quarter. Meanwhile, Europe’s Euronext 100, China’s Shanghai Index, and Japan’s Nikkei 225 declined by 2.76%, 2.58%, and 0.553%, respectively, amid geopolitical situation and weakening macro factors. DJ sukuk index ended the quarter with just over 0.6% increase as yields largely remained volatile. Commodities’ markets also rewarded investors with good returns where gold surged by 5.26%, DJ Commodity Index increased by 3.09%, however, oil declined by 3.34%, in Q2 of 2024 amid heightened uncertainty and delay in interest rate cutting cycle. On the currency front, UK pound closed the quarter almost flat against US dollar.

Portfolio Commentary

During the first quarter of the year, all our portfolios performed positively. The rise in equity markets particularly the US, and appreciation in commodities (gold and silver) were the key drivers of performance. Progressive Growth portfolio was the best performing portfolio with an uplift of 3.6% during the quarter and a year-to-date performance of 10.8%.

Performance of Simply Ethical Online Portfolios in Q2 (01 April 2024 – 30 June 2024)

Year to Date Performance of Simply Ethical Online Portfolios (01 January 2024 – 30 June 2024)

During the quarter, there were no changes made to the investment allocation for any portfolios. Given our cautious view on equity markets, we continue to maintain a relatively higher sukuk allocation particularly for Balanced Growth, Growth and Progressive Growth portfolios. The second half of 2024 will be impacted by the direction of interest rates, inflation and the US presidential election, amongst other factors. As your active investment manager, we remain vigilant on prevailing risks and continue to manage risks and adjust portfolios where appropriate.

To learn more about our investment approach and how we can help you, book a free initial consultation with one of our Financial Advisers.

Disclaimer

Data as of 31 March 2024. This article is for information only. Please do not act based on anything you might read in this article. Past performance is not a reliable indicator of current or future returns. This article contains general information only and does not consider individual objectives, taxation position or financial needs. Nor does this constitute a recommendation of the suitability of any investment strategy for a particular investor. It is not an offer to buy or sell or a solicitation of an offer to buy or sell any security or instrument or to participate in any trading strategy to any person in any jurisdiction in which such an offer or solicitation is not authorised or to any person to whom it would be unlawful to market such an offer or solicitation.

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