Investment Insights - Hot Topics November
Welcome to Balance: Wealth Planning's Hot Topics!
Welcome to Balance: Wealth Planning's November edition Hot Topics.
Every month, our financial planners collate the latest 'hot topics' within the profession, to update you regularly as they occur and cover any frequently asked questions you have.
This month, it’s all about the moving markets. Global financial markets are abuzz as major stock indices are reaching all-time highs, signalling a pivotal moment for investors. From the S&P 500 to the Nasdaq and other global indices, this surge reflects a mix of optimism, resilience, and caution.
In this newsletter, we break down what’s driving this trend and what it means for investors.
What to expect from the Autumn Budget 2024
The market's rollercoaster: where we are right now
After months of uncertainty, several US stock indices have reached all-time highs, including:
• S&P 500: The S&P 500 index reached a record high, briefly crossing the 6,000 level for the first time. This rally was fueled by post-election optimism and expectations of favourable economic policies.
• Dow Jones Industrial Average: The Dow also closed at record highs, benefiting from a surge in investor confidence following the US presidential election and Federal Reserve actions.
• Nasdaq Composite: The Nasdaq Composite index added to its record highs, driven by gains in large-cap technology stocks and overall market optimism.
Closer to home, indices such as the FTSE 100 and the German DAX have been a little more volatile. The UK market has been affected by geopolitical tensions, particularly related to the conflict in Ukraine and concerns over potential tariffs from the US under President Donald Trump.
Currency fluctuations have also played a role, with a strong US dollar impacting UK stocks differently depending on their revenue sources.
Specific sectors, such as housebuilders and certain large-cap stocks like AstraZeneca and Mondi, have weighed down the index due to company-specific challenges and broader market conditions. Reinforcing the belief that having a home bias does not provide optimal risk-adjusted returns.
The power players pushing markets higher
1. Tech: The unstoppable engine mega-cap tech stocks remains the driver of this growth, with companies like Apple, Microsoft, and Nvidia continuing to post impressive earnings. The AI boom and increased enterprise spending on cloud computing and semiconductors have solidified tech’s dominance in the current market cycle.
2. Consumer spending: Consumer spending in the US and Europe has remained steady, supported by strong labour markets and rising wages. This resilience has reassured investors and added momentum to broader market indices.
3. Changes in monetary policy: Central banks, particularly the US Federal Reserve, are approaching the end of their rate-hiking cycles and shifting to easing (reducing rates). While interest rates remain elevated, markets are starting to price in potential rate cuts in 2024, with some already being seen, a scenario that historically favours equities.
4. Global economic stability: Recession fears have diminished, with the IMF projecting moderate global growth. In particular, China’s stimulus measures to revive its slowing economy have supported commodities and related sectors.
Investor sentiment: a delicate balance
While the record highs cause celebration, many investors remain cautious with concerns over valuation, geopolitical tensions, and lingering inflation risks. Some analysts warn that a pullback or correction could be on the horizon, particularly if economic data disappoints or central banks adopt a more hawkish tone than anticipated.
What should investors do now?
1. Diversify with indices: Avoiding overconcentration in one sector or region is essential. Spreading investments across asset classes and geographies can help mitigate risks.
2. Rebalance portfolios: this is a good time to review asset allocations. Gains in equities may have skewed your portfolio from its intended mix, so consider rebalancing to maintain your risk tolerance. If you are invested in our Balance Wealth model portfolios, you will already benefit from the automatic tolerance-based rebalancing.
3. Stay calm, stay prepared: Volatility is inevitable even in bullish markets. Ensure you have a clear financial plan and sufficient liquidity to weather potential market corrections without panic-selling.
Conclusion: The big picture
All-time highs are a natural part of market cycles. Over time, equity markets tend to trend upwards, driven by innovation, economic expansion, and productivity gains. Long-term investors should focus on achieving personal financial goals rather than reacting to short-term market movements.
The current market rally highlights the resilience of global financial markets and the opportunities that arise even amidst challenges. For investors, it’s a moment to reflect on strategy, ensure alignment with long-term goals, and seize opportunities wisely.
If you’re feeling uncertain about what this means for you, you won’t be alone. At Balance: Wealth Planning, we help our clients navigate markets, focus on their goals, and make confident, informed decisions. Please get in touch or book a meeting online to discuss anything mentioned in this month’s edition of Balance: Wealth Planning’s hot topics.
Please note: This update is not financial advice and is provided for information only. You should not take any action before speaking to a Financial Planner, who will confirm what suits you.
Please feel free to share it with anyone who may be interested. If you have any questions, please get in touch with your usual contact or investments@balancewealth.uk.