Global Matters | Monthly
Market review & outlook
August 2024

With us, investing is personal

Contents

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01 >

02 >

Global market review & outlook

Market performance - Global

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03 >

04 >

Market performance - UK

Asset allocation views

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Global market review & outlook
By the end of August, the big correction in markets in late July/early August seemed a distant memory, withmarkets quickly regaining most of the ground lost in that sudden and very brief risk-off event. Most asset classes
and markets ended August in positive territory, with the MSCI World index of developed market equities +2.6%,
MSCI Emerging Markets +1.6%, and global government bonds +2.4%, all in USD terms. Returns were boosted
by weakness in the US dollar, which fell by 2.1% against the euro and GBP, 2.6% versus the yen, and 2.7% on
a trade weighted basis (taking its fall since the end of June to 4.7%, wiping out its earlier gains in 2024). Gold
continued to perform well, benefitting from dollar weakness, protecting capital during the brief market sell-off,then participating fully in the subsequent recovery. Gold’s rise of 2.3% in August took its gain year-to-date to21.3%, making it the best performing major asset class.
US dollar performance against select currencies(1$:LC - indexed to 1 Jan 2024)

US dollar trade weighted index & gold(indexed to 1 Jan 2024)
125

115
113

120

111
109

115

At its August monetary policy meeting, the Fed kept rates on hold but clearly signalled a cut in September,placing more emphasis on increased risks to its maximum employment goal, a dovish shift that was emphasised
at Chair Powell’s annual Jackson Hole speech, when he said that the Fed does not ‘seek or welcome further
cooling in labour market conditions’ and that ‘the time has come for policy to adjust – the direction of travel isclear, and the timing and pace of rate cuts will depend on incoming data’. The only questions on investors’ minds
are whether the first cut in September will be 25bps or 50bps, and what the subsequent pace of cuts will be,with markets pricing in 100bps of cuts by year end, and a further 100bps by mid-2025.
With inflation falling steadily towards policy targets across the developed world, most central banks havealready begun the process of easing policy, the exceptions being the BoJ, which is very gradually normalising
policy by raising rates, and the Fed, now on the cusp of cutting rates. Despite the long period of high rates andtight policy, financing conditions and credit spreads have remained relatively benign, raising the prospect ofthe much-sought soft landing for economies. The main concerns are of a softer labour market and weakness
in the manufacturing sector, now facing recessionary conditions globally; leading indicators have weakened inrecent months in most key economies, notably so in China, which remains mired in structural problems, withweakening growth momentum, and in Germany, the manufacturing hub of the EU.

107
105

Global manufacturing in recessionary conditions
Manufacturing Purchasing Managers Indices - below 50 is contraction

110

103
105

101
99

63

100

97
95
Dec-23Jan-24Feb-24Euro

Mar-24 Apr-24 May-24 Jun-24
Sterling

Yen

Jul-24Aug-24

Swiss Franc95
Dec-23Jan-24Feb-24Mar-24 Apr-24 May-24 Jun-24
Dollar Index

Jul-24Aug-2458

Gold

Source: Bloomberg Finance L.P. as at 5 September 2024.

The key concerns that triggered the sudden falls in markets early in the month proved to be mis-placed, or shortlived. Fears of slower growth in the US economy, particularly a weaker labour market following data showing
much slower job creation, were eased as subsequent data releases showed ongoing resilience in the economy.
The dramatic unwinding of the yen carry trade, triggered by the Bank of Japan’s (BoJ) rise in interest rates andhawkish tone in late July, was stabilised as the BoJ provided assurance that it would refrain from interest rate
rises when markets are unstable, and fears of collateral damage as leveraged positions were rapidly unwoundproved unfounded. Markets quickly returned to more normal conditions as investors focussed on the prospect of
the Fed’s rate cutting cycle ahead.

53

48

43

38

Sep-21

Feb-22

Jul-22

Dec-22US

UK

Eurozone

May-23Oct-23China

Mar-24Aug-24Germany

Source: Bloomberg Finance L.P. as at 31 August 2024.

“The only questions on investors’ minds arewhether the first cut in September will be 25bps
or 50bps and the subsequent pace of cuts”>>

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These factors, along with the increased certainty of a series of rate cuts ahead by the Fed, have resulted insignificant declines in bond yields, driven in part by a fall in inflation expectations but mostly by falling real
yields. Since the end of June, 10-year inflation expectations in the US, as measured by break-even rates, havefallen by 14bps to 2.15%, while 10-year real rates have dropped by 35bps to 1.76%, taking the 10-year Treasury
bond yield down to 3.9% by end August, 50bps lower than at the end of June. The falls in yields have been evensharper at shorter maturities as rate cuts come into view, and the yield curve, which has been inverted for over 2
years, the longest period on record, has steepened and moved close to a more normal curve where the duration
risks of longer maturities are reflected in higher yields than shorter dated bonds.
US Treasury bonds: 10-Year yields, breakevens and real yields

Breakevens, 10Y Real Yields, 10Y Bond Yields YTD

2.5

5.1

2.4

4.9

2.3

4.7

2.2
2.1

4.5

2

4.3

1.9

4.1

1.8

3.9

1.7

3.7

1.6
1.5
January

3.5
February

March

US 10Y Breakevens (LHS)

April

May

June

US 10Y Real Yields (LHS)

July

August

10Y Bond Yields (RHS)

Source: Bloomberg Finance L.P. as at 5 September 2024.

Falling bond yields have been a strong tailwind for multi-asset portfolios since April this year, after having
suffered from the sharp rise in yields in the preceding couple of years. At the same time, there has been asignificant rotation in recent weeks out of megacap tech stocks, mostly US based, into a broader spread ofsectors. The Magnificent 7 US tech stocks, widely seen to be the prime beneficiaries to date of the AI boom,
have seen considerable volatility, especially in Nvidia, and the Mag 7 index fell by 9% between mid-July andend August, a period when the S&P 500 index was flat. Some of this underperformance has been caused
by increasing question marks around the sustainability of their high valuations, which leave little room fordisappointments, along with concerns that their huge capital investments into AI-related infrastructure will pay
little rewards for some time. Also, the near-monopoly position of some of these companies, especially Nvidia, isattracting the attention of regulators. Inevitably, the extraordinary outperformance of this elite group of stocks
could not be expected to go on indefinitely, and the broadening out of the market is a welcome shift for active
managers, which have almost universally been underweighted in this area.

Events in the Russia-Ukraine war and the conflictin the Middle East during August raised fears
of wider escalations, although to date there has
been no material impact on energy prices. The
oil price fell by 2.4% in August, worries about
weak demand especially from China outweighing
supply worries.

“the key issue for investors remains
the US economy and Fed monetary
policy”

The unpredictability of geopolitics aside, the key
issue for investors remains the US economy andFed monetary policy. The economy is slowing
and softer than previously thought, but current
conditions are not evidently recessionary. The
labour market has weakened but unemployment
is still low compared with previous cycles andwages are rising in real terms. Investment
remains strong, inflation has fallen to levels
which give the Fed ample room to cut rates, andthe recent softening of the economy will only
accelerate that programme.
The rate cutting cycle is underway in Europe andwill begin in the US in September, where rates
are likely to be at least 150bps lower by mid2025. Bond yields have reflected some of these
expectations, but real yields still offer value, andthis is not an environment which is bad for risk
assets. We recognise the risk of policy error andthe possibility of the economy weakening further,
but the Fed has considerable room to ease andgiven its dual mandate which prioritises bothinflation control and maximum employment, it
will no doubt use its full armoury if necessary.
We therefore remain broadly constructive aboutmarkets, and, as in early August, we intend to use
periods of weakness to add to risk assets in our
portfolios.

Geopolitics has been a persistent concern for investors over the past couple of years, and events in August
did nothing to ease those concerns. With Biden dropping out of the US Presidential race, the outcome has
been thrown into doubt. Trump seemed set on a near-certain win, but the early success of Kamala Harrison the campaign trail has left the outcome wide open. However, investors have a reasonable idea of what a
Harris Presidency might mean, essentially more of Biden, while another Trump Presidency is considerably
more predictable than his first term, when he, his team, and his policies were either in constant flux or largely
unknown quantities. One near-certainty seems to be that, whoever becomes President, the huge fiscal deficit in
the US will not be reined in, something that is likely to become of increasing concern in the years ahead.

>>

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Market performance - Global (local returns) as at 30 August 2024
Asset Class / Region

Index

Ccy

1
month

3
monthsYTD

12monthsDeveloped Markets Equities

Asset Class / Region

Index

Ccy

1
month

3
monthsYTD

12monthsProperty

United States

S&P 500 NR

USD

2.4%

7.3%

19.2%

26.6%

US Property Securities

MSCI US REIT NR

USD

6.4%

16.0%

12.1%

20.5%

United Kingdom

MSCI UK NR

GBP

1.1%

2.6%

12.0%

17.7%

Australian Property Securities

S&P/ASX 200 A-REIT Index TR

AUD

0.1%

5.9%

15.5%

21.4%

Continental Europe

MSCI Europe ex UK NR

EUR

1.8%

1.2%

11.3%

16.9%

Asia Property Securities

S&P Asia Property 40 Index NR

USD

6.3%

7.9%

-0.5%

3.2%

Japan

Topix TR

JPY

-2.9%

-2.0%

16.0%

19.0%

Global Property Securities

S&P Global Property USD TR

USD

5.7%

12.5%

9.4%

18.5%

Asia Pacific (ex Japan)

MSCI AC Asia Pacific ex Japan NR

USD

2.3%

6.5%

11.2%

16.7%

Currencies

GlobalMSCI World NR

USD

2.6%

6.6%

16.7%

24.4%

Euro

USD

2.1%

1.8%

0.1%

1.9%

UK Pound Sterling

USD

2.1%

3.0%

3.1%

3.6%

Emerging Markets Equities
Emerging Europe

MSCI EM Europe NR

USD

-2.3%

-2.0%

12.9%

20.1%

Japanese Yen

USD

2.6%

7.6%

-3.5%

-0.4%

Emerging Asia

MSCI EM Asia NR

USD

1.6%

6.4%

12.5%

17.0%

Australian Dollar

USD

3.4%

1.7%

-0.7%

4.3%

Emerging Latin America

MSCI EM Latin America NR

USD

2.6%

-2.7%

-12.6%

0.4%

South African Rand

USD

2.2%

5.5%

3.0%

5.9%

China

MSCI EM China NR

USD

1.5%

3.8%

9.0%

11.1%

Commodities & Alternatives

BRICs

MSCI BRIC NR

USD

1.0%

-2.2%

4.4%

-2.8%

Commodities

RICI TR

USD

-0.2%

-5.3%

2.9%

-2.4%

Global emerging markets

MSCI Emerging Markets NR

USD

1.6%

5.9%

9.5%

15.1%

Agricultural Commodities

RICI Agriculture TR

USD

2.3%

-6.9%

-0.3%

-3.5%

Oil

Brent Crude Oil

USD

-2.4%

-3.5%

2.3%

-9.3%

Gold Spot

USD

2.3%

7.6%

21.3%

29.0%

Bonds
US Treasuries

JP Morgan United States Government Bond TR

USD

1.3%

4.4%

2.6%

6.0%

Gold

US Treasuries (inflation protected)

BBgBarc US Government Inflation Linked TR

USD

0.8%

3.4%

3.3%

6.1%

Interest Rates

Current Rate

US Corporate (investment grade)

BBgBarc US Corporate Investment Grade TR

USD

1.6%

4.7%

3.5%

9.3%

United States

5.50%

US High Yield

BBgBarc US High Yield 2% Issuer Cap TR

USD

1.6%

4.6%

6.3%

12.5%

United Kingdom

5.00%

UK Gilts

JP Morgan UK Government Bond TR

GBP

0.5%

3.6%

-0.4%

6.9%

Eurozone

4.25%

UK Corporate (investment grade)

ICE BofAML Sterling Non-Gilt TR

GBP

0.3%

2.8%

1.8%

9.5%

Japan

-0.10%

Euro Government Bonds

ICE BofAML Euro Government TR

EUR

0.4%

2.9%

0.7%

5.0%

Australia

4.35%Euro Corporate (investment grade)

BBgBarc Euro Aggregate Corporate TR

EUR

0.3%

2.7%

2.6%

7.3%

South Africa

8.25%Euro High Yield

BBgBarc European HY 3% Constrained TR

EUR

1.2%

2.7%

5.3%

11.5%

Japanese Government

JP Morgan Japan Government Bond TR

JPY

1.2%

1.4%

-2.1%

-2.0%

Source: Bloomberg Finance L.P. , Momentum Global Investment Management. Past performance is not indicativeof future returns.

Australian Government

JP Morgan Australia GBI TR

AUD

1.2%

3.5%

2.7%

4.9%

Global Government Bonds

JP Morgan Global GBI

USD

2.4%

5.5%

0.7%

5.2%

Global Bonds

ICE BofAML Global Broad Market

USD

2.3%

5.4%

1.8%

6.7%

Global Convertible Bonds

ICE BofAML Global Convertibles

USD

1.6%

3.5%

5.3%

9.1%

Emerging Market Bonds

JP Morgan EMBI+ (Hard currency)

USD

2.7%

5.3%

7.3%

14.2%

>>

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Market performance - UK (all returns GBP) as at 30 August 2024
Asset Class / Region

Index

Local
Ccy

1
month

3
monthsYTD

12monthsEquities

Index

Local
Ccy

1
month

3
monthsYTD

12months

S&P Global Property TR

GBP

3.4%

9.1%

6.4%

14.4%

Euro

GBP

-0.1%

-1.2%

-2.9%

-1.6%

US Dollar

GBP

-2.1%

-2.9%

-3.0%

-3.4%

Japanese Yen

GBP

0.5%

4.4%

-6.4%

-3.9%

Asset Class / Region
Property

UK - All Cap

MSCI UK NR

GBP

1.1%

2.6%

12.0%

17.7%

Global Property Securities

UK - Large Cap

MSCI UK Large Cap NR

GBP

1.3%

2.6%

13.2%

18.6%

Currencies

UK - Mid Cap

MSCI UK Mid Cap NR

GBP

-0.9%

1.1%

1.4%

8.5%

UK - Small Cap

MSCI Small Cap NR

GBP

-0.9%

2.8%

10.3%

18.3%

United States

S&P 500 NR

USD

0.2%

4.1%

16.0%

22.2%

Continental Europe

MSCI Europe ex UK NR

EUR

1.8%

0.1%

8.1%

15.0%

Japan

Topix TR

JPY

-2.2%

2.2%

8.7%

14.3%

Asia Pacific (ex Japan)

MSCI AC Asia Pacific ex Japan NR

USD

0.1%

3.3%

8.2%

12.6%

Global developed markets

MSCI World NR

USD

0.4%

3.4%

13.6%

20.1%

Global emerging markets

MSCI Emerging Markets NR

USD

-0.6%

2.8%

6.6%

11.1%

Bonds
Gilts - All

ICE BofAML UK Gilt TR

GBP

0.5%

3.8%

-0.6%

6.9%

Gilts - Under 5 years

ICE BofAML UK Gilt TR 0-5 years

GBP

0.4%

2.0%

1.9%

5.7%

Gilts - 5 to 15 years

ICE BofAML UK Gilt TR 5-15 years

GBP

0.4%

3.7%

-0.2%

7.8%

Gilts - Over 15 years

ICE BofAML UK Gilt TR 15+ years

GBP

0.8%

5.3%

-3.1%

6.5%

Index Linked Gilts - All

ICE BofAML UK Gilt Inflation-Linked TR

GBP

-0.2%

2.0%

-2.7%

2.8%

Index Linked Gilts - 5 to 15 years

ICE BofAML UK Gilt Inflation-Linked TR 5-15 years

GBP

-0.2%

1.5%

-0.6%

4.9%

Index Linked Gilts - Over 15 years

ICE BofAML UK Gilt Inflation-Linked TR 15+ years

GBP

-0.3%

2.6%

-5.4%

0.4%

UK Corporate (investment grade)

ICE BofAML Sterling Non-Gilt TR

GBP

0.3%

2.8%

1.8%

9.5%

US Treasuries

JP Morgan US Government Bond TR

USD

-1.0%

1.2%

-0.4%

2.2%

US Corporate (investment grade)

BBgBarc US Corporate Investment Grade TR

USD

-0.7%

1.4%

0.4%

5.4%

US High Yield

BBgBarc US High Yield 2% Issuer Cap TR

USD

1.6%

4.6%

6.3%

12.5%

Euro Government Bonds

ICE BofAML Euro Government TR

EUR

0.4%

2.9%

0.7%

5.0%

Euro Corporate (investment grade)

BBgBarc Euro Aggregate Corporate TR

EUR

0.3%

2.7%

2.6%

7.3%

Euro High Yield

BBgBarc European High Yield 3% Constrained TR

EUR

1.2%

2.7%

5.3%

11.5%

Global Government Bonds

JP Morgan Global GBI

GBP

0.2%

2.4%

-2.0%

1.5%

Global Bonds

ICE BofAML Global Broad Market

GBP

2.3%

5.4%

1.8%

6.7%

Global Convertible Bonds

ICE BofAML Global Convertibles

GBP

1.6%

3.5%

5.3%

9.1%

Emerging Market Bonds

JP Morgan EMBI+ (Hard currency)

GBP

0.5%

2.2%

4.4%

10.2%

>>

Page | 10

Commodities & Alternatives
Commodities

Rogers International Commodity (RICI) TR

GBP

-2.3%

-8.1%

0.1%

-5.8%

Agricultural Commodities

Rogers International Commodity (RICI) Agriculture TR

GBP

0.1%

-9.6%

-3.0%

-6.9%

Oil

Brent Crude Oil

GBP

-4.5%

-6.3%

-0.5%

-12.4%Gold

Gold Spot

GBP

0.1%

4.4%

18.1%

24.5%

Interest Rates

Current Rate

United Kingdom

5.00%

Source: Bloomberg Finance L.P. , Momentum Global Investment Management. Past performance is not indicativeof future returns

Page | 11>>

—

SEPTEMBER 2024

Asset allocation views
Score
MAIN ASSET CLASSES

Change//—Equities—

Fixed Income—

Alternatives

—

Cash

—

Score
EQUITIES

Change//—Developed Equities—

UK Equities—

European Equities—

US Equities—

Japanese Equities—

Emerging Market Equities

—

Score

ChangeFIXED INCOME—

Index-Linked—

Investment Grade Corporate—

High Yield Corporate—

Emerging Market Debt

—

Score
SPECIALIST ASSETS/ALTERNATIVES

Change//—Global Listed Property—

Global Infrastructure—

Specialist Financial—

Liquid Alternatives

—

Gold

—

Score
CURRENCIES vs. USD

Change
//—

GBP

—

EUR

—

JPY

—

---

--

-

/

+

++ +++

---

--

-

/

+

++

+++

Overall View
We remain somewhat cautious on equity risk overall, mindful of the dominance of the US in the global
equity context, and of the concentration within the US market. Our fixed income view remains largely
constructive, more so in sovereign bonds which still offer attractive nominal and real yields, but we
recognize risk premia on corporate credit are thin today. Alternative assets including gold remain a gooddiversifier of returns, proving useful as market volatility has increased. Cash provides optionality on any
pullback as well as a decent yield, but increasingly we prefer to lock in medium term rates by extending
duration.

---

--

-

/

+

++

+++

UK equities remain the highest conviction valuation call with the UK remaining the cheapest developed
market. The attractive earnings yields continue to draw in private and overseas buyers, and with therecent election behind us, sentiment finally appears more constructive. Japan remains attractive bothon improving fundamentals and in valuation terms – more so after recent volatility saw prices correct
sharply. The lack of breadth in US equities has started to play out through a sector and size rotation
which should increasingly favour an active approach to stock selection. European equities have opticallyquite attractive valuations but mask some fundamental regional challenges. Emerging market equities
remain cheap as China, the dominant index constituent, battles domestic growth concerns.

Global treasury yields still look attractive today, despite recent tightening, and we maintain ouroverweight government view. Inflation linked bonds offer reasonable real yields but are not particularly
cheap today. Despite offering alluring all in yields, we think the spreads offered today on investment
grade and riskier high yield corporate bonds do not compensate investors adequately for the underlying
fundamental credit risk. Although defaults remain low, the growth outlook has moderated, and financial
conditions remain somewhat tight today. We prefer shorter duration bonds in both developed andemerging markets, particularly higher quality credit.

---

--

---

--

---

--

-

/

+

++

+++

-

/

+

++

+++

-

/

+

++

+++

//—

Government

Score

+

Alternatives continue to offer diversification benefits but compete today with higher yielding cash andquality sovereign bonds. Increasing discounts in NAVs in listed private equity appear overly pessimistic,
and we upgrade our view to take advantage. Infrastructure and specialist financials remain attractive.
Our liquid alternatives continue to offer attractive diversification benefits during periods of market
uncertainty, but the bar has been raised for the performance from this sector after the resetting higherof global rates in recent years. Gold’s status as a haven asset means it remains a useful diversifier, but its
recent run higher makes it look somewhat expensive as a non interest bearing asset today.

Against long term valuation metrics, the Yen remains cheap relative to the Dollar. The Bank of Japan’s
policy of yield curve control crushed the Yen in recent years, but their recent shift to a hiking bias has
seen a rapid reappraisal as carry trades unwind. This should have further to run. The higher for longer
narrative in the US has buoyed the dollar, but as rates look set to fall later this year its dominance
may wane. Its safe haven status at a time of heightened geopolitical risk does however assure it adiversification premium.

The asset allocation views are updated at the end of each quarter unless otherwise stated.

>>

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