Reports

September 2024 (click here to download)

VAM Fund

September 2024 was a month marked by heightened volatility in global equity markets, driven by both macroeconomic and geopolitical factors. Central Banks were under pressure to reduce rates across many developed markets, and, although we had seen some like the BoE cut last month, the Fed finally made its first rate cut, since March 2020, in what is expected to be the beginning of a measured reduction of base rates now that the threat of inflation has ostensibly been brought under control. Federal Reserve, chairman Jerome Powell vowed to do what it takes to keep the economy growing, while signalling he won’t rush future rate cuts.

The cut of 50 basis points was the general expectation from investors and economists, so there was no major reaction, but the cut gave some confidence to the market that the economy remains on a solid footing despite some previous weaker employment and manufacturing data. The question remains whether the Fed is now cutting rates in order to protect a healthy economy or to prop up a slowing one. The latest strong jobs report for September confounded some expectations, but bolstered sentiment. The mixed economic signals continue to be somewhat confusing to many in the markets, and we are definitely continuing to see an elevated level of volatility especially as there is a concerning geopolitical backdrop that is now weighing on sentiment.

September is typically the cruellest month for stocks, but the indices recorded monthly wins to finish the month. Notably, the S&P 500 notched its best year-to-date performance at September’s end since 1997 and also enjoyed its best quarter since the fourth quarter of 2021. Both the S&P 500 and the DJIA hit all-time highs which has confounded many market watchers as during the quarter, stocks recorded some of their best and worst days in years as investors grappled with recession fears and uncertainty about interest rates.

Much of that was calmed as we came to the end of the quarter only to be replaced by worries around the escalation in hostilities in the Middle East and the likely knock-on effect on oil prices should Israel decide to target Iran’s oil producing infrastructure. The oil price has been muted this year by the downturn in demand from China, but it is looking like speculators are returning to the commodity as price worries worsen.

The presidential election in November is the event that could cause a short-term shock to the markets. The race is too tight to call, but the current inept handling of the conflicts in Ukraine and the Middle East followed by the fumbling of the rescue efforts following tropical storm Helene, has not aided Kamala Harris’s bid after a very strong initial campaign phase. With regards to stocks, more often than not, the market’s knee-jerk reaction to a presidential election is not indicative of its performance over the next year. Still, the presidential candidates have outlined their positions on tariffs and corporate taxes that, if enacted, would surely change the outlook for US businesses.

Volatility is a two-way street that can provide astute investors with opportunities to buy stocks at more attractive valuations. Heightened volatility can also turbocharge short-term returns. Since 1990, the S&P 500 has returned 16% on average in the six months after the Cboe Volatility Index has risen to 29 or higher, compared with an average return of 5% in less volatile periods.

Further afield, in emerging markets fears over the Chinese economy abated somewhat as Beijing announced a considerable stimulus package targeted at bolstering the ailing property market and boosting consumer confidence. The PBOC announced plans to lower borrowing costs and inject more funds into the economy, as well as to ease households’ mortgage repayment burden. This has injected some confidence into the market, but it is too early to say if the stimulus is enough to turn around China’s economy and meet the 5% growth target. The improvement in sentiment helped the commodities markets given their sensitivity to the Chinese economy. Equities in the luxury goods sector and some European industrial names also rallied on the news as they are potential beneficiaries of increased exports.

Gold continued its standout performance, helping propel shares in gold mining companies. Something significant is happening in the gold market and there is a mix of positive ingredients with the US Dollar weak, a troubled geopolitical picture and falling interest rates around the world and it appears gold’s appeal as a store of value has attracted new buyers. Central Banks have been keen purchasers, especially China, which has helped inflate the price.

The fourth quarter is usually a good one for markets but it is essential to keep a close eye on economic and geopolitical factors and to ensure the fund is well diversified to negate any risk of concentration should there be a sell-off.

VAM MULTI-ASSET FUNDS

VAM Cautious Fund

With September traditionally a weak month for equities, Global equity markets ended September in positive territory, having been negative through the first 25 days of the month. A difficult start to the month was reversed by positive news on interest rates, with the Federal Reserve opting for a 50 bps cut as opposed to a more expected 25 bps rate cut, while also indicating that more cuts were on the way. The European Central Bank delivered its second rate cut in September, taking interest rates down to 3.5%. Though UK inflation was steady at 2.2%, a tighter labour market in the UK is keeping wage growth elevated, with the Bank of England keeping interest rates at 5.0% as a result. US equity markets outperformed developed market peers over the month, with UK, European and Japanese markets seeing negative returns.

Chinese markets rallied following a raft of stimulus measures from the People’s Bank of China, with the coordinated nature of September’s policies a clear signal of China’s willingness to support its economy and markets. The benefits spilled out into emerging markets and the Asia-Pacific region, with the commodities and luxury goods sectors also beneficiaries of the latest Chinese stimulus. Positive returns can also be seen from Fixed Income mar-kets, with more credit sensitive assets (e.g. High Yield) leading the way.

VAM Balanced Fund

With September traditionally a weak month for equities, Global equity markets ended September in positive territory, having been negative through the first 25 days of the month. A difficult start to the month was reversed by positive news on interest rates, with the Federal Reserve opting for a 50 bps cut as opposed to a more expected 25 bps rate cut, while also indicating that more cuts were on the way. The European Central Bank delivered its second rate cut in September, taking interest rates down to 3.5%. Though UK inflation was steady at 2.2%, a tighter labour market in the UK is keeping wage growth elevated, with the Bank of England keeping interest rates at 5.0% as a result. US equity markets outperformed developed market peers over the month, with UK, European and Japanese markets seeing negative returns.

Chinese markets rallied following a raft of stimulus measures from the People’s Bank of China, with the coordinated nature of September’s policies a clear signal of China’s willingness to support its economy and markets. The benefits spilled out into emerging markets and the Asia-Pacific region, with the commodities and luxury goods sectors also beneficiaries of the latest Chinese stimulus. Positive returns can also be seen from Fixed Income mar-kets, with more credit sensitive assets (e.g. High Yield) leading the way.

VAM Growth Fund

With September traditionally a weak month for equities, Global equity markets ended September in positive territory, having been negative through the first 25 days of the month. A difficult start to the month was reversed by positive news on interest rates, with the Federal Reserve opting for a 50 bps cut as opposed to a more expected 25 bps rate cut, while also indicating that more cuts were on the way. The European Central Bank delivered its second rate cut in September, taking interest rates down to 3.5%. Though UK inflation was steady at 2.2%, a tighter labour market in the UK is keeping wage growth elevated, with the Bank of England keeping interest rates at 5.0% as a result. US equity markets outperformed developed market peers over the month, with UK, European and Japanese markets seeing negative returns.

Chinese markets rallied following a raft of stimulus measures from the People’s Bank of China, with the coordinated nature of September’s policies a clear signal of China’s willingness to support its economy and markets. The benefits spilled out into emerging markets and the Asia-Pacific region, with the commodities and luxury goods sectors also beneficiaries of the latest Chinese stimulus. Positive returns can also be seen from Fixed Income mar-kets, with more credit sensitive assets (e.g. High Yield) leading the way.

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South African Investors: This is a Section 65 approved fund under the Collective Investment Schemes Control Act 45, 2002 (CISCA). Boutique Collective Investments (RF) (Pty) Ltd is the South African Representative Office for this Fund. Boutique Collective Investments (RF) (Pty) Ltd is registered and approved under the Collective Investment Schemes Control Act (No.45 of 2002).

Disclaimer

VAM Fund, Cautious, Balanced and Growth Funds are compartments of VAM Managed Funds (Lux).

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