Winter Update 2024
Positive global share market momentum carried into the second quarter of 2024 for the USA, although share market returns in other regions were variable.
The outlook for interest rates remained unchanged, however there is growing expectation for a general reduction in interest rates around the globe. In June, the European Central Bank and the Bank of Canada became the first of the major banks to begin cutting rates. With local inflation heading in the right direction, it looks as though the Reserve Bank of New Zealand may soon follow suit.
In the key US market, the Federal Reserve held the federal funds rate steady at 5.25% throughout the quarter, with officials there citing the need to cool persistently high inflation.
Against this backdrop, the US share market extended its bull run that began in late 2022, with the S&P 500 Index reaching all-time highs during the quarter. This performance was led, once again, by the strong performance from a handful of large capitalisation companies in the information technology sector. Unfortunately, the New Zealand share market continues to lag many of its global peers with weak economic growth, and stubborn inflationary pressures, continuing to challenge local policymakers.
On the global political stage, uncertainty and change seems to be in store in 2024. After a relatively brief campaign, the Conservatives have just relinquished Downing Street after 14 years in power in the UK. Emmanuel Macron’s snap election resulted in no clear winner, leaving France without a new prime minister or government and in political chaos just weeks before they welcome the world for the Olympic Games. Meanwhile, the lead-up to the US presidential election has been even more volatile than pundits expected, including the shocking attack on former President Donald Trump in early July. With President Biden's recent withdrawal from the election, the race is now wide open. He has endorsed Vice President Kamala Harris as his successor, and many Democrats are rallying behind her. However, the final decision on the nominee will be made at the national convention in Chicago next month. This shift adds an unexpected dynamic to the electoral landscape just months before the nation votes in November.