The third quarter of 2024 marked a significant shift in global monetary policy, with major central banks initiating easing cycles to combat slowing growth and moderating inflation. The Federal Reserve led with a larger-than-expected 50 basis point cut, bringing its benchmark rate to 5 per cent. China's central bank unleashed a substantial stimulus package, including a 50 basis-point cut to the reserve requirement ratio, potentially freeing up 1 trillion yuan for lending.
Market reactions were mixed, reflecting the complex interplay between policy shifts and regional economic dynamics. Global equities eked out a modest 0.15 per cent gain for the quarter, with Asian markets outperforming, up 4.01 per cent. US large-caps retreated slightly, while small-caps advanced. European shares declined, with UK equities showing mixed results. Fixed income rallied broadly, with high-yield debt up 6.43 per cent.
Our portfolios remained resilient amid volatility. We are tactically reducing exposure to Japanese equities while increasing allocation to Asian markets, given compelling valuations and potential for further policy support. Fixed income allocations have benefited from the shift towards monetary easing.
The global economy has demonstrated resilience, with portfolio returns outperforming benchmarks year to date. Corporate profits are reviving, a trend expected to continue into 2025. Developed economies have experienced a notably shallow recession, with low unemployment and growing consumer spending despite cost-of-living pressures.
Looking ahead, our cautiously optimistic outlook is guided by a diversified, data-driven approach to portfolio construction. As interest rates ease, sectors like manufacturing and housing are poised for improvement. 2024 has established a robust foundation for returns after a period of uncertainty, supporting clients' financial goals in this evolving economic landscape.
The effectiveness of monetary policy measures remains a key focus, particularly in China where the property sector continues to pose risks to regional growth. Despite these challenges, the coordinated easing by major central banks provides a supportive backdrop for economic growth and corporate earnings.
We remain ready to adjust our approach as the global economic landscape evolves. Our goal is to optimise returns while managing risk, ensuring our clients' portfolios are well-positioned to navigate the opportunities and challenges that lie ahead.