Economic and Market Overview
Generally summer months (Q3) can be relatively quiet period for financial markets but this year has been somewhat eventful with central bank policy changes, elections in Europe, escalation in Russia-Ukraine conflict, the continuation of genocide in Gaza by Israeli forces (over 41,000 people killed) and moreover, the conflict spreading across the region as Israeli forces target high profile individuals across the region and enter Lebanon for ground offensive. The macroeconomic situation remains challenging whilst political uncertainties are ever present and growing, which certainly make decision making difficult for policy makers. Nevertheless, the impact of politics on the markets has been muted thus far, as all asset classes (i.e., equities, bonds/sukuks, commodities) performed well during Q3 with the backdrop of cooling inflationary pressures and a shift towards easing monetary policy. Equities in the U.S. and China performed well in response to reduction in policy rates from the respective central banks, while European and Japanese equities declined mainly driven by domestic macroeconomic environment. Bonds/sukuks also rallied as falling yields helped sukuk values rise as newly issued bonds/sukuks become less attractive compared to older bonds/sukuks. Commodities, especially precious metals, saw significant price increases during Q3 as dollar weakens amid move monetary policy easing from the Fed. Economic commentators are expecting more rate cuts in Q4 of this year, which is helping the sentiment to remain positive, albeit macroeconomic challenges and heightened political uncertainty remains a possible risk to the market.
Looking at the performance of major asset classes in Q3, gold led the gains as yellow metal delivered 13% return, and just under 28% since start of the year, as the bet for the safe heaven increased amid weakening US dollar and worsening geopolitical situation, particularly in the Middle East. However, crude oil prices fell over 18%, contributing to negative performance of DJ Commodity Index during the quarter. Equity markets broadly delivered mixed performance led by China Shanghai surging by 11.4% followed by US S&P 500 and DJ Islamic Markets Index rising by 5.6% and 4.3%, respectively, amid start of the easing monetary policies across the globe. The UK FTSE 100 increased by 1.8% while Europe’s Euronext 100 and Japan’s Nikkei 225 dropped by 0.8% and 4.3%, respectively, driven by macroeconomic concerns as UK GBP appreciated 5.8% against US dollar and Japan tightened monetary policy. Lastly, DJ sukuk index ended the quarter with 4.6% increase in value as yields fell sharply during Q3 (bonds’ values increase as yields fall and vice versa).
Performance of Global Assets Q3 2024
Portfolio Commentary
During the third quarter, all our portfolios dropped in value as financial markets remained volatile and moreover, the appreciation in pound against US dollar adversely impacted the returns despite underlying investments rising in value. The GBP/USD exchange rate rose by 5.79% during the quarter from $1.2645 to $1.3377. Physical Gold ETC was the best performing investment within all portfolios – living up to its expectation of a reliable hedge against US dollar. Thus far YTD, all portfolios have performed positively with Progressive Growth portfolio delivering 8.3% return since start of the year.
Performance of Simply Ethical Online Portfolios in Q3 (01 July 2024 – 30 September 2024)
Year to Date Performance of Simply Ethical Online Portfolios (01 January 2024 – 30 September 2024)
During the quarter, we made a number of changes to all our portfolios. For Defensive, Conservative Cautious and Balanced portfolios, the allocation to Physical Gold ETC was raised whilst allocation to sukuk funds was reduced. As for relatively higher risk portfolios, namely, Balanced Growth, Growth and Progressive Growth, the equity allocation was reduced in favour of commodities and sukuks. We continue to maintain a cautious view on investments, as current market valuation may be difficult to maintain given challenging macroeconomic environment ahead and heightened political uncertainties – both remain a possible risk to the markets.
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
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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