The General Election on 4 July brought a widely anticipated change of Government for the UK, with the Labour party winning a large majority. New Chancellor of the Exchequer Rachel Reeves announced that the Budget will take place on 30 October and warned of “difficult decisions” on tax and public spending.
The UK economy expanded by 0.6% in the second quarter of 2024, following growth of 0.7% in the second quarter. Inflation ticked up slightly, with the July CPI (Consumer Price Index) figure coming in at 2.2%. The Bank of England was still comfortable to reduce the UK base rate by 0.25% to 5.0% at its August meeting.
The FTSE 100 Index rose by 2.5% during July but just 0.1% during August, while the FTSE 250 Index – which represents medium-sized companies that tend to have more domestic exposure than the blue-chip index – rose by 6.5% in July but declined by 2.4% in August.
August provided a roller-coaster ride for investors. Weak US employment data triggered a sharp decline in global share prices early in the month, as investors became worried about the outlook for the US economy. However, stronger retail sales activity provided some reassurance, and the annualised CPI figure fell again in August to 2.5%, fuelling speculation that the Federal Reserve might cut rates in September.
The S&P500 dropped over 6% within the first three trading days, but finished August up 2.3%. The combined share price of the “Magnificent Seven” (Alphabet, Amazon, Apple, Meta Platforms, Microsoft, NVIDIA and Tesla) fell by nearly 10% in the first week of August, but the Nasdaq Composite Index still gained 0.6% over the month. The Dow Jones Industrial Average Index rose by 1.8% over the month and ended August on another high.
The eurozone’s economy expanded by 0.3% during the second quarter of 2024, although Germany’s economy shrank by 0.1%. The annualised rate of CPI eased from 2.6% to 2.5% in July, although, as in the UK, services inflation remained relatively high.
Meanwhile, following the Bank of Japan’s (BoJ’s) decision to increase its key interest rate in July, share prices in Japan plummeted amid an unwinding of the yen carry trade (a type of foreign exchange trade in which money is borrowed in one currency at low interest and used to make high-interest investments in another currency). The Nikkei 225 Index experienced its second-worst day since 1965 during August, but subsequently rallied to end the month 1.2% lower.
Closer to home, the unemployment rate in Northern Ireland reached a new record low of 2% in May, according to figures released by NISRA (the Northern Ireland Statistics and Research Agency).
NISRA also reported that average (median) employee pay in Northern Ireland increased by over 11% year-on-year in August, to £2,328 (gross) per month.
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The value of your investment can go down as well as up and you may not get back as much as you originally invested.