Market Update – June 2024

The UK election will take place on 4 July, with current polls indicating a clear win for Keir Starmer’s Labour Party. Although the date of the election was earlier than expected, there was little reaction from financial markets to the announcement.

The rate of UK inflation fell again in May, with Consumer Price Inflation (CPI) dropping back to the Bank of England’s target of 2%. The Bank held its interest rate at 5.25% at its June meeting, with the next rate decision due in August.

The UK economy moved out of its brief recession during the first three months of 2024, posting quarterly growth of 0.6%. Growth is predicted to remain sluggish however, with the International Monetary Fund (IMF) recently raising its 2024 growth forecast to 0.7% and the Organisation for Economic Cooperation & Development (OECD) expecting growth of 0.4% this year and 1% in 2025.

US equity markets have continued to benefit from strong performance in the technology sector. The Dow Jones Industrial Average hit a new record high in May, although has fallen back slightly since, while the S&P500 and Nasdaq Composite both hit new record highs in June. Nvidia, the leading chip manufacturer for the AI industry, briefly overtook Microsoft and Apple as the world’s most valuable company, before its share price dipped again.

Inflation has continued to fall in the US, with CPI easing from 3.4% in April to 3.3% in May. The Federal Reserve (Fed) maintained its key federal funds rate at a range of 5.25% to 5.5%, with the Fed Chair Jerome Powell reiterating that any decision to cut rates “ really will depend on the data”.

The European Central Bank (ECB) cut its key interest rate in June, from an all-time high of 4% to 3.75%. The ECB confirmed that conditions have improved in the eurozone, supported by moderating inflation and improved investor confidence, but warned that the outlook is still fragile, and markets remain vulnerable to the risk of macro-financial and geopolitical shocks.

The Japanese economy, now the world’s fourth largest after being overtaken by Germany, shrank at an annual rate of 2% in the first quarter of this year, as consumption and exports declined. Although unemployment has stayed relatively low in the world’s fourth largest economy at around 2.6%, wage growth has been slow, and prices have risen partly due to weakness of the yen against the US dollar.

Closer to home, data compiled by Land & Property Services (LPS) showed that the average price of a home in Northern Ireland increased by 0.4% in the first quarter of 2024, and 4.0% year on year. The average price now stands at £178,499, ranging from £158,038 in Derry City and Strabane to £210,592 in Lisburn and Castlereagh.

Other figures from the Northern Ireland Statistics and Research Agency (NISRA) showed that housebuilding in Northern Ireland fell to a 60-year low in 2023. Just 5,379 new dwellings were completed during 2023, including 570 social houses.

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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.

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