Q3: UK small and mid-cap equities
UK small and midcaps outperformed as investors priced in an improving outlook for domestically focussed businesses as UK economic growth was revised higher for 2024 and 2025.
Q3: Asian & Emerging Markets equities
Asian & Emerging Market equities rose sharply as wide-ranging stimulus measures by the Chinese authorities were announced, positively surprising investors.
Q3: Japanese equities
The Bank of Japan moved against the trend of interest rate cuts by other major Central Banks and marginally raised interest rates.
This caused the Japanese Yen to strengthen, pushing Japanese equities sharply lower.
Q3: US equities
The narrowing interest rate differential between the US and Japan forced some investors to abruptly unwind a long-standing carry trade. This led to selling pressure in US technology and Magnificent 7 stocks in the early part of the quarter.
US stocks recovered into quarter end, with returns broadening out. US value stocks outperformed their growth counterparts and US smaller companies rallied strongly.
Q3: Government and corporate bonds
Government and corporate bonds delivered positive returns as inflation trended lower and interest rates were cut.
Q4: Outlook
Markets remain well supported despite the challenging geopolitical environment:
- Global economic growth remains robust
- Measures of financial conditions are improving
- China has started to stimulate more forcefully
- Investors have ample cash to deploy
- Seasonally returns are typically positive in the final quarter
