Analysing Q3 2024: Investment Market Performance

As we navigate the financial landscape, it's important to stay informed about how investment markets are performing. The third quarter of 2024 (1 July – 30 September) brought both challenges and opportunities for investors. In this article, we'll take a closer look at how investment markets performed over the quarter, and we’ll highlight some of the key economic factors from across the world that influenced these outcomes.
 

Australia

-   Share market: The S&P/ASX 200 Index, representing the top 200 companies on the ASX, rose sharply over the quarter, up 7.79%. In September, China's measures to support the property sector led to a 13% rebound in Australia’s materials sector, a key beneficiary.
-   Interest rates: Australia's inflation rate remains higher than the Reserve Bank of Australia’s (RBA) target band. Core inflation, excluding volatile items like food and energy, is still above target despite decreasing from 3.5% in July to 2.8% in September. High rental prices and service inflation are the key contributors. These factors are prompting the RBA to maintain interest rates at 4.35% to help bring inflation down.
-   Housing market: The Australian housing market as measured by CoreLogic's Home Value Index (HVI) rose 1.0% in the September quarter, the lowest rise in the national HVI over a rolling three-month period since March 2023 when the market started to rebound. The flow of new listings coming onto the market was 3.2% higher than a year ago and is 8.8% higher than the previous five-year average for this time of the year.
-   Australian dollar: The Australian dollar rose over the quarter despite initially falling from 0.67c (July 1st) to 0.65c (1st August), before climbing to a high of 0.69c due to announcements of China's property market support and the US’s Federal Reserve's 0.5% cut in interest rates.
 

New Zealand  

-   Share market: The NZX 50 Index, which tracks the performance of the top 50 companies listed on the New Zealand Stock Exchange, rose 6.03% over the quarter.  
-   Housing market: The New Zealand housing market as measured by the QV House Price Index showed that home values decreased by an average of 1.6% nationally over the last quarter. The average home is now worth NZ$901,920, which is 0.3% higher than the same time last year, although below its peak of NZ$1,063,765 set in January 2022.
-   Interest rates: The Reserve Bank of New Zealand (RBNZ) which has kept interest rates at 5.5% since March 2020 to bring inflation down, made its first 0.25% interest rate cut on 14th August, taking interest rates down to 5.25%. Post the end of the quarter, the RBNZ cut rates again, this time by larger amount of 0.5% to 4.75% as inflation is expected to return to the RBNZ’s target band of 1-3%. This was welcome news for the New Zealand economy that is currently experiencing weakened business investment, soft consumer spending and an elevated unemployment rate compared to the lows experienced in 2022.
 

United States  

-   Share market: The S&P500 Index, representing the top 500 large-cap US equities was up by 5.25% over the quarter in USD terms. Unlike previous quarters where the US share markets was primarily driven by strong performance from technology companies, this quarter saw a broader set of companies from across a variety of sectors perform well.
-   Interest rates: The US is at the start of an easing interest rate cycle. Interest rates were cut for the first time in four years on September 19th to a range of 4.75% - 5%.  In light of the progress made by the Federal Reserve on controlling inflation, this decision was influenced by the adverse risk of maintaining higher interest rates on economic activity and signs of a slowing labour market.
 

China  

-   Economic stimulus: During the quarter, China launched its biggest stimulus since the pandemic, to bring the economy back towards the government's growth target. Deflationary pressures driven by weak consumer demand and low investments by businesses has been negatively impacting the Chinese economy. The large monetary stimulus package was aimed at boosting household confidence, increasing consumer income levels and assisting with the current inventory overhang in the property sector.
-   Implications for Australia: China’s lower domestic demand for construction and related sectors is expected to adversely impact demand for iron ore, ferroalloys and other raw materials. As one of China's largest partners, Australia's iron ore exports are expected to be negatively impacted, although may look to offset this by leveraging the quality and maturity of its iron ore to attract demand elsewhere.
 

Japan  

-   Interest rates: Unlike much of the rest of the world that is moving towards or currently is in an easing interest rate cycle, the Bank of Japan (BOJ) unexpectedly lifted its key interest rate by 25 basis points to 0.1%. Consumer spending has continued to be sluggish, but the BOJ expects rising wages to lift the price of services and keep inflation sustainable at the BOJ’s 2% target.  
 

Eurozone

-   Interest rates: The European Central Bank (ECB) cut rates from 4.25% to 3.65% over the quarter. This decision was primarily driven by their projection of inflation falling to within the ECB’s 2% target range.  
 

Navigating the landscape

Investors are presently dealing with multiple factors, including interest rates, economic stimulus, elections and geopolitical issues. While interest rates for many central banks appear to have peaked and are now being cut, investors are looking forward and assessing the timing and pace of these cuts.

China’s economic stimulus package was a welcome announcement, but investors will be anticipating more, particularly around boosting consumer confidence and sustaining economic growth. China's economic size means that it has significant influence on global growth and in particular on the economies and export markets of both Australia and New Zealand.

Geopolitical risk from the ongoing conflict in the Middle East continues to influence commodity markets and investor sentiment. The potential risk of further escalation will be closely watched. Any significant developments in this region could lead to volatility in oil prices, which may have downstream effects on global inflation rates and industrial production costs.

The U.S. elections on November 5th will be of particular interest for investors. The anticipated fiscal policies post the election will likely influence investor sentiment, market stability and international trade relations. Given the size and influence of the U.S. economy, shifts in U.S. fiscal policy can have meaningful impacts on global markets.

Staying updated on market trends, understanding the drivers of performance and aligning investment strategies with individual goals and risk tolerance are key steps in achieving financial objectives.

It’s important to note that the information provided in this article is for general information purposes only and should not be considered as financial advice. Each individual's financial circumstances are unique, and it is recommended to consult with qualified professionals before making any investment decisions.

Remember, the investment landscape is subject to change and it's essential to consider the most recent and relevant information when making financial decisions.

Sources:

¹S&P/ASX 200 Index Performance - ASX
 

²NZX 50 Index Performance – NZX
 

³S&P500 Index Performance - US
 

⁴Reserve Bank of Australia Monetary Policy - RBA
 

⁵Reserve Bank of New Zealand Official Cash Rate - RBNZ
 

⁶Australian House Prices – CoreLogic
 

⁷NZ house Prices – QV House Price Index