Mid-Year Global Market and Property Trends: 2024 Update
Written on 25 July 2024 by
As we pass the midpoint of 2024, it's time to review global market and property trends and provide an outlook for the rest of the year. This update highlights key developments in developed and emerging markets, fixed income, and property sectors, offering insights into future expectations.
Market Summary
Developed Markets
The first half of 2024 has been marked by substantial growth in developed markets, driven predominantly by a robust US market. The overall performance of developed markets has been impressive, with a 13% gain, largely influenced by the US equities, which surged by 15.8%. This remarkable growth was fuelled by the technology sector, where giants like Nvidia have reached new all-time highs. The significant outperformance of growth stocks compared to value stocks highlights a continued investor preference for companies with strong future earning potentials.
Emerging Markets
Emerging markets have shown a respectable gain of 8.6%, with Taiwan and Turkey leading the way. Taiwan's technology sector has been a strong performer, benefiting from surging global demand for AI chips. In Turkey, economic reforms and improved political stability have contributed to market gains. However, not all regions have fared as well.
Fixed Income
The fixed income market has experienced mixed results. US Treasuries and UK gilts have both suffered losses due to shifting interest rate expectations, reflecting the market's adjustment to potential rate hikes. In contrast, corporate bonds have remained mostly flat, indicating a cautious stance amongst investors who are balancing the potential for higher returns against the risks of economic volatility.
The Rest of 2024 and Beyond
Global Economy
The global economy started the year with a cautious outlook, with many concerned about a potential slowdown. However, as we progress through 2024, there is growing optimism that a US recession can be avoided in the near term. The labour market remains robust, with unemployment rates staying low, and real incomes rising, which supports consumer demand. This positive consumer sentiment is a critical driver of economic activity and suggests a stable economic environment for the remainder of the year.
Regional Growth
In the UK and Europe, signs of economic recovery are becoming more evident. Higher wages and potential interest rate cuts are expected to boost consumer spending, which in turn will drive economic growth. The recent UK election outcome, which was widely anticipated, is likely to encourage economic investment, as businesses and investors now have more certainty about the political landscape. This stability can lead to increased economic activity and growth in various sectors.
US Market
In the US, a modest slowdown is anticipated as higher interest rates begin to impact consumer and business spending. Despite this, the continued decline in inflation could pave the way for interest rate cuts, creating a more favourable market environment. This potential for lower interest rates would support economic growth by making borrowing cheaper for consumers and businesses, encouraging investment and spending.
Emerging Markets
Emerging markets are facing a dynamic set of challenges and opportunities. China's export difficulties have opened the door for other emerging markets to fill the gap and expand their market share. Additionally, China's government is implementing interest rate cuts and stimulus measures, which could have a positive impact on global market dynamics by boosting demand and stabilizing economic conditions in the region, although the highly leveraged distressed property sector will be a challenge for the Government over an extended period.
Fixed Income
The medium-term outlook for UK gilts is positive, despite several risks on the horizon. UK inflation is expected to rise modestly as the year progresses, but be close to the Bank of England’s 2% target over its 2 - 3 year time horizon. The new Government’ Budget could introduce further economic challenges. However, there are mitigating factors that could offset these risks. Current yields for UK gilts and US Treasuries are much higher than they have been in recent years, providing a cushion against potential economic slowdowns. If growth unexpectedly slows while inflation remains under control, interest rates could be cut, leading to lower bond yields and higher bond prices. This scenario would benefit bond investors by offering diversification against the potential negative impact on share prices from lower economic growth.
Property Market Trends
The Q2 2024 report by Landmark Information Group provides valuable insights into residential property trends in England, Scotland and Wales. The report reflects a mix of cautious optimism and challenges influenced by current high interest rates.
Transaction Volumes and Market Conditions
The property market has seen a significant increase in supply, with listings up by 6% compared to 2019. However, the number of transactions in Q2 2024 at the Sold Subject to Contract (SSTC) stage decreased by 32% from Q2 2019. Completion rates, despite a slight uptick in May, remain approximately 40% below Q4 2019 levels. The average time from offer to completion has increased to 19 weeks, which is a 64% rise since 2007, highlighting inefficiencies in the current process.
Conveyancer Market Activity
The SSTC to listings ratio in Q2 2024 was significantly lower than in Q2 2019, indicating continued affordability constraints. While supply remains strong, demand is subdued, with Q2 2024 down 32% compared to Q2 2019. This imbalance between supply and demand is affecting market dynamics,slowing down transaction processes and has produced relatively small price movements over the last couple of years.
Mortgage Valuations and Approvals
High interest rates have been a major factor influencing the mortgage market, leading to subdued activity in Q2 2024. Valuation volumes in Q2 2024 were below those of Q2 2023, reflecting the impact of these rates on mortgage approvals and overall market activity.
Conclusions and Outlook
Despite current challenges, there are signs that the property market will improve with economic stability. The high level of listings offers buyers more options, potentially pressuring sellers to adjust prices and leading to a more balanced market. Monitoring interest rate trends and post-election economic policies will be crucial for anticipating market movements and making informed decisions.
Lenders are responding to competition by repricing competitive mortgage deals and expanding lending criteria, which will continue to improve mortgage availability and stimulate demand, enhancing overall market activity and supporting a more vibrant property market.
Global growth remains resilient, although modest, bolstered by improving levels of consumer spending and low unemployment rates, though inflationary pressures persist due to fluctuating commodity prices and supply chain disruptions.
The outlook for the remainder of 2024 is reasonably positive, with falling inflation and potential interest rate cuts possibly reducing economic headwinds and boosting financial assets. While we remain optimistic, it is essential to stay vigilant about ongoing risks and opportunities to ensure continued market success.
Category:Nicholas Mendes
