Market review
A summary of how financial markets performed during the second quarter of 2024.
It was a mixed quarter for investment markets with equities in the US delivering strong returns, while those in Europe, Asia and New Zealand were mostly lower. Meanwhile, bond markets were broadly unchanged.
Global markets
It was another strong quarter for US equity markets with most indices trading to record highs, while European markets faced pressure amid geopolitical uncertainty. The gains in the US were helped in part by the ongoing AI-boom, while progress on inflation also boosted sentiment. For the quarter, the S&P 500 Index rose 4.3%, while the NASDAQ 100 Index was up 8.5% – both reached record highs.
European equity markets were generally lower, after French President Emanuel Macron and UK Prime Minister Rishi Sunak both called snap elections, creating uncertainty for investors. After reaching a record high earlier in the quarter, the Euro Stoxx 50 Index gave up its early gains and ended the quarter down 2.1%.
Bond markets delivered muted returns. Signs of sticky inflation early in the period suggested interest rates may need to stay ‘higher for longer’ – an environment in which bonds would have struggled. Later however, there were signs that inflation was reverting back towards central bank target levels and, while growth has slowed, it meant central banks were more comfortable cutting interest rates.
During the quarter several central banks cut interest rates for the first time this cycle, including the European Central Bank, the Swiss National Bank and the Bank of Canada. A similar move was not forthcoming in the US however, as a resilient economy saw the US Federal Reserve lower its expectations for rate cuts in 2024 to only one.
New Zealand market
New Zealand equities finished the quarter lower, with the NZX 50 Index down 3.2%. The local market retreated given the challenging economic backdrop.
During the quarter, economic data showed the unemployment rate rose to 4.3% (the highest level since mid-2021), business and consumer sentiment remained downbeat, and retail spending data suggested New Zealanders were tightening the screws as the cost-of-living crisis continued. Meanwhile, GDP (Gross Domestic Product) figures showed the economy came out of a recession, but on a per person basis it continues to contract at a material pace.
Despite ongoing challenges, businesses and households got no relief from the Reserve Bank of New Zealand (RBNZ), as it maintained its hawkish bias, raising its forecasted Official Cash Rate peak by 5 basis points to 5.65%, implying a 60% chance of another interest rate hike. The RBNZ said that despite a slowing economy, its number one goal is to get inflation back to its 1-3% target range.
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Past performance does not indicate future performance. The actual performance realised by any given investor will depend on many things, is not guaranteed, and may be negative as well as positive.
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