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Key takeaways

Rising expectations that US interest rates will be cut by more than 0.25% fuelled a strong rally for US share prices.

Greed versus fear in the US
A week after producing its weakest weekly return in percentage terms so far this year, the S&P 500 (which represents the share prices of the largest US-listed companies), recovered for its best weekly performance of 2024. This was in spite of some unhelpful mid-week inflation data, excluding energy and food constituents, that rose more than expected. Markets soon looked through this blip, so much so that by the end of the week, expectations of a 0.5% rate cut from the US central bank increased dramatically.

Interest rate cuts in Europe
As expected, the European Central Bank (ECB) cut interest rates by 0.25% to 3.50%, its second cut of the year. Further rate cuts will depend on the incoming economic data. The ECB cut its growth forecasts for 2024, 2025 and 2026, while the inflation outlook was broadly unchanged. The growth downgrade is consistent with our view that the green shoots of economic growth which were appearing in Europe look like they are abating at the moment. This creates risks for global growth and adds more fuel to the fire for central banks to cut interest rates.

Harris takes the lead in the US
A televised debate between the US presidential candidates led to the general consensus that Kamala Harris had come out on top. Trump appeared to miss out on numerous opportunities to go on the attack on Harris’ record in the White House. Betting odds reflected this, as did the share price fall of Trump Enterprises and the spike in the share price of clean energy company First Solar, as a Democratic win in November would be viewed as positive for this sector. But while Harris is on the ascendancy, the poll gaps are narrow: even a week is a long time in politics, and there are five weeks to go until the election.

A reckoning for the UK?
Based on its analysis of UK government policy, the independent Office of Budget Responsibility (OBR) has reported that unless the government takes action, the UK’s public debt could triple in the next 50 years. It forecasts this could rise to 270% of UK economic output (GDP) by 2070, compared to just under 100% currently and added that it considered this an ‘unsustainable path’. With businesses and individuals already being softened up ahead of a ‘hard choices’ budget in October, this assessment is downbeat, even as the OBR admits the uncertainties associated with such long-term forecasts.

Market moves

  • Gold hit another record high of $2,570.03/oz. as investors increased bets that the US Federal Reserve (Fed) would reduce interest rates by more than the expected 0.25%.

  • Technology stocks rallied as Nvidia’s CEO reported that "chip demand was incredible”.

What to look out for this week

  • In a big week for central bank updates, policymaker meetings are due at the US Fed, the Bank of England, and the Bank of Japan. All are set to announce their latest interest rate decisions.

  • The latest inflation data (measured by the Consumer Price Index, or CPI) is also due for release in the UK and Europe.

Important Information

Handelsbanken Wealth & Asset Management Limited is authorised and regulated by the Financial Conduct Authority (FCA) in the conduct of investment and protection business, and is a wholly-owned subsidiary of Handelsbanken plc. For further information on our investment services go to wealthandasset.handelsbanken.co.uk/important-information. Tax advice which does not contain any investment element is not regulated by the FCA. Professional advice should be taken before any course of action is pursued.

All commentary and data is valid, to the best of our knowledge, at the time of publication. This document is not intended to be a definitive analysis of financial or other markets and does not constitute any recommendation to buy, sell or otherwise trade in any of the investments mentioned. The value of any investment and income from it is not guaranteed and can fall as well as rise, so your capital is at risk.

We manage our investment strategies in accordance with pre-defined risk objectives, which vary depending on the strategy’s risk profile.

Portfolios may include individual investments in structured products, foreign currencies and funds (including funds not regulated by the FCA) which may individually have a relatively high risk profile. The portfolios may specifically include hedge funds, property funds, private equity funds and other funds which may have limited liquidity. Changes in exchange rates between currencies can cause investments of income to go down or up.

This document has been issued by Handelsbanken Wealth & Asset Management Limited. For Handelsbanken Multi Asset Funds, the Authorised Corporate Director is Handelsbanken ACD Limited, which is a wholly-owned subsidiary of Handelsbanken Wealth & Asset Management, and is authorised and regulated by the Financial Conduct Authority (FCA). The Registrar and Depositary is The Bank of New York Mellon (International) Limited, which is authorised by the Prudential Regulation Authority and regulated by the FCA. The Investment Manager is Handelsbanken Wealth & Asset Management Limited, which is authorised and regulated by
the FCA.

Before investing in a Handelsbanken Multi Asset Fund you should read the Key Investor Information Document (KIID) as it contains important information regarding the fund including charges and specific risk warnings. The Prospectus, Key Investor Information Document, current prices and latest report and accounts are available from the following webpage: wealthandasset.handelsbanken.co.uk/fund-information/fund-information/, or you can request these from Handelsbanken Wealth & Asset Management Limited or Handelsbanken ACD Limited: 77 Mount Ephraim, Tunbridge Wells, Kent, TN4 8BS or by telephone on
+44 01892 701803.

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