In November all eyes (and markets) were focused on the US election, and with a Trump win it set the tone for a rally in developed markets. US equities posted a strong gain of 6% in USD terms with all sectors and market captilisations up. Asian equities faired worse as the potential tariffs on Chinese exports into the United States saw Asian equities and, in particular Chinese equities, sell off on negative sentiment.

In October a rise in bond yields, coupled with a rising US dollar and waning impacts of the Chinese stimulus in September saw growth assets generally fall with bonds also producing negative returns.

In September, the US Federal Reserve cut the US Fed Funds rate by 0.5% to 4.75-5.00%. US inflation appears to be under control with August data revealing US inflation at an annualised rate of 2.5% p.a. much lower than the 9% p.a. peak seen in 2022. US employment whilst resilient has softened, justifying a more accommodative monetary policy stance. The European Central Bank also cut rates in the month by 25bps to 3.50% following on from their previous 25bps cut in June due to falling inflation and slower economic growth.

In early August markets were volatile as almost simultaneously the Bank of Japan hiked interest rates at the same time as US employment data was released showing that payrolls softened. This led to the Japanese currency strengthening versus the US Dollar which in turn saw Japanese equity markets fall by over 20% in a day and US technology stocks sell off as the unwinding of the infamous “carry trade” occurred. However, by month end markets were little changed as fears of a massive unwinding of the carry trade dissipated.

Australian markets were influenced in July by a slight softening in inflation data that saw bond markets go from pricing in a potential rate hike at the next RBA meeting (5th - 6th August) to a potential rate cut by February. This lifted Australian equites to new highs and also saw bond yields fall (prices increase).

In June US inflation for the year to May was released with the annual rate of inflation falling to 3.3% (down from 3.4% the previous month) which is still much higher than the US Federal Reserve’s targeted 2% inflation rate. US bond yields responded favourably to the improved inflation data over the month.

In May US inflation for the year to April was released with the annual rate of inflation falling to 3.4% (down from 3.5% the previous month) which is still much higher than the US Federal Reserve’s targeted 2% inflation rate. Despite the higher inflation print bond yields, or to put it another way, the expected future cash rates fell assisting US equity valuations.