As we approach the end of 2024, financial markets are grappling with significant volatility, underscored by recent geopolitical events and economic shifts. UBS has highlighted that the biggest uncertainty in the second half of 2024 will stem from geopolitical tensions, particularly with upcoming elections in the UK and France, which could alter power dynamics in Western democracies [24b361df]. The political landscape in the US remains polarized, especially following President Joe Biden's announcement not to run for re-election, potentially reshaping the electoral field [eb02cf32].
Market analysts from M&G have noted that Q3 2024 was marked by notable volatility, which emphasized the necessity for agile investing strategies. They predict that US fixed income may outperform if the Federal Reserve implements further rate cuts in response to weaker macroeconomic data [2567fbb4]. The Fed has already cut rates by 50 basis points, which could provide a boost to equity markets [2567fbb4].
UBS remains cautiously optimistic about the investment outlook, advising investors to maintain diversification and balance income from safe sources with growth exposure from risk assets. They recommend focusing on high-quality bonds and U.S.-denominated debt in emerging markets, alongside cyclical stocks [eb02cf32]. The bank's overall view emphasizes the theme of 'quality' in both bonds and equities, with expectations for quality bonds to yield positive returns [9ab4fc34].
In Japan, the political landscape has shifted with Shigeru Ishiba winning the Prime Minister position, which may influence market dynamics further [2567fbb4]. Japanese equities experienced the largest three-day drawdown in history recently, highlighting the volatility in that market [2567fbb4]. Despite these challenges, the MSCI China Index saw a remarkable recovery, rising 53% from its trough, indicating potential opportunities for active investors [2567fbb4].
On October 11, 2024, Lombard Odier's Managing Partner, Frédéric Rochat, discussed the volatile economic environment at the Rethink Perspectives event in Geneva. He noted that the past five years have been shaped by COVID-19, the war in Ukraine, inflation, and interest rate surprises. Chief Economist Samy Chaar projected US growth at around 2%, European growth between 0.5% and 1%, and China's growth at 4-5%, dismissing recession risks due to stable jobless claims in the US and euro zone [091e9eff].
Lombard Odier's analysis highlights manageable geopolitical risks from Ukraine and the Middle East, with oil prices stable between USD 75 and USD 80 per barrel. The upcoming US elections in November could also impact the economy, particularly if Donald Trump is re-elected. Overall, the economic environment is deemed favorable for investing, with a balanced portfolio recommended [091e9eff].
UBS predicts a 3.5% dip in profits for Australian firms in 2024, with certain sectors like banking and retail facing the brunt of the decline. However, companies with US exposure may benefit from a weaker Australian dollar, and insurers are expected to see improved profitability [fa19f211].
Sebastian Mullins from Schroders anticipates that the Fed may cut rates up to three times before the year's end, maintaining a positive outlook on equities overall but cautioning against stretched valuations in the US market [919ba39d]. Meanwhile, Lombard Odier expects equity markets to stabilize ahead of the next US labor market report and the Fed's September meeting, favoring UK equities in their strategic asset allocation [b6b5055a].
Habib Bank AG Zurich's chief investment officer, Dr. David Wartenweiler, echoes the sentiment of cautious optimism, noting that the second half of 2024 could be challenging for global markets. He emphasizes the importance of portfolio diversification and flexibility to navigate these turbulent times [ad87f5b2]. The bank is also witnessing growth in its client base among high-net-worth individuals seeking innovative financial solutions and sustainable investments, particularly in the Dubai International Financial Centre [ad87f5b2].
In summary, while the market landscape is fraught with volatility and uncertainty, there are opportunities for strategic investors who remain agile and diversified in their approaches. The interplay of geopolitical events, central bank policies, and economic data will continue to shape the investment environment as we move into 2025.