Investment market update: November 2024

On 5 November 2024, US citizens voted for their next president, and the election had a knock-on effect on investment markets and business prospects around the world.

Republican Party nominee Donald Trump will serve a second term as president of the US. Trump has previously spoken about imposing harsh import tariffs, including a tariff of up to 60% on goods imported from China or a blanket 20% tariff on every US trading partner.

So, it’s unsurprising that the results of the election are being felt across the world. Indeed, Bloomberg’s Commodity Index suggests the prices of industrial metals and commodities have already slumped due to concerns about a “tit-for-tat global trade war”.

The Labour government delivered its Autumn Budget at the end of October, and the repercussions were still being felt at the start of November.

Credit ratings agency Moody’s said the Budget would be an “additional challenge” for public finances as the announcements would do little to boost UK economic growth. It noted there was also a limited buffer if the UK faced a financial shock.

Similarly, S&P stated that public finances would be “constrained” but added that public investment plans could create a more business-friendly environment.

The FTSE 100 dropped to a three-month low on 8 November. This was partly due to retailers suffering losses as it became clear how higher rates of employer National Insurance contributions announced in the Budget could affect profitability. Marks & Spencer saw a 4.5% drop, and Tesco (2.9%), JD Sports (2.7%), and Sainsbury’s (2.5%) all suffered losses too.

On the same day, housebuilder Vistry issued its second profit warning in as many months, after it said cost overruns on building projects were worse than previously thought. This led to its share price tumbling almost 20%.

The headline economic figures released in November indicate the UK is stagnating.

According to the Office for National Statistics (ONS), GDP per head fell 0.1% in the third quarter of 2024 in real terms – the measure is used as an indicator of the country’s living standards.

In addition, ONS figures show inflation increased to 2.3% in the 12 months to October 2024. The rise could mean the Bank of England delays plans to reduce its base interest rate.

Readings from Purchasing Managers’ Indices (PMI) suggest business activity is weakening. However, some businesses may have paused investments and key decisions until the Budget was delivered, so activity could pick up in the final months of 2024.

In October, the British manufacturing PMI had a reading of 49.9 – slightly below the 50 mark that indicates growth. While still in growth territory, the service sector also slowed when compared to a month earlier with a reading of 52.

There’s already speculation about what a Trump presidency will mean for the UK.

The National Institute of Economic and Social Research said the protectionist measures planned by Trump could halve the UK’s economic growth in 2025 and 2026.

Yet, there may be some good news for investors. On the back of Trump’s victory, the pound weakened on 6 November. This led to the FTSE 100 jumping 1.3% as share prices lifted for multinational firms. For example, equipment rental company Ashtead, which would benefit from a strong US economy, saw a 6.6% boost.

Europe

While PMI readings suggest the eurozone economy is improving, it has recorded production falling for 19 consecutive months as of October 2024. The bloc’s two largest economies are playing a role in dragging down the figure as both France and Germany are affected by exports falling and weak demand.

Trump’s victory also had repercussions across Europe.

Shares in European renewable energy companies slid on 6 November as Trump has previously spoken about plans to boost US oil production. Danish wind turbine maker Vestas Wind Systems fell 8% and German solar energy producer SMA Solar Technology was down 10.4%.

Similarly, the threat of tariffs from the US hit German carmakers on 6 November. Porsche was the biggest faller on the German index DAX after it tumbled 7.4%, followed by BMW, Mercedes-Benz, and Volkswagen.

Just days before the US election, official figures showed that just 12,000 new jobs were added to the US economy in October. The figure is far below the 113,000 that economists expected and the 254,000 recorded in September. The low number may be due to businesses holding back decisions until election uncertainty passed, but it may have dealt a blow to the Democratic Party.

On 6 November, the day after the US election, the US dollar had its best day in four years as it climbed 1.6% against a basket of other countries.

In pre-trading on 6 November, shares in Trump Media & Technology were up almost 36%. Similarly, Elon Musk, who is a supporter of Trump, saw his business Tesla receive a 13% boost in premarket trading.

When the US stock market opened, it reached an all-time high. The S&P 500 index was up 1.9% and the Dow Jones benefited from a 3% bump as investors bet on Trump’s policies stimulating economic growth.

US company Disney also saw a boost on 14 November and share prices hit a six-month high. The value of the business increased by almost 10% thanks to the success of films Inside Out 2 and Deadpool & Wolverine.

Inflation in the US continues to be above the 2% target. In the 12 months to October 2024, inflation was 2.6%, up from the 2.4% recorded in September.

Asia

China responded to the threat of Trump tariffs saying there would be no winners if a trade war began. Instead, ambassador Xie Feng said the US and China should focus on mutually beneficial cooperation to achieve many “great and good things”.

It was good news for China’s economy in October, with an official PMI showing factory activity returned to growth, ending five consecutive months of contraction. On 1 November, the news led to Hang Seng in Hong Kong adding 1% and the Shanghai Composite index rising by 0.4%.

Perhaps surprisingly, Japan’s Nikkei index gained as it waited for the outcome of the US general election on 5 November. The index rose 1.9% as a weaker yen boosted Japanese exporters’ overseas earnings.

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.

Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.