T3 Monthly Insights - Sep 2024

Both China and the U.S. have decisively pivoted towards growth-oriented policies, setting the stage for a potential continuation of the risk-on rally into 2025. September 2024 saw key policy shifts, with the Federal Reserve and China enacting measures that enhance the likelihood of a global economic soft landing, further supporting risk assets.

Last month, the Federal Reserve cut interest rates by 50bps, its first rate reduction since 2020. The cut brings the overnight rate to the 4.75%-5.00% range, and signaled a shift in focus from inflation control to safeguarding economic growth and employment. The easing measures, alongside steady economic data, supported U.S. equities, with the S&P 500 closing at a new all-time high, up 2.02% m/m, while the NASDAQ gained 2.68%. The dollar remained relatively stable, with the DXY slipping only 0.9% to end the month at 100.779.

Meanwhile, Chinese markets experienced one of their strongest rallies in nearly 16 years. The CSI 300 and Hang Seng Index surged 20.97% and 17.48%, respectively, following a series of government interventions aimed at revitalizing the economy. On September 24, China's central bank unveiled a suite of supportive measures, including rate cuts, reductions in reserve ratios, property market easing, and stock market stimulus, sparking renewed investor confidence and driving markets higher.

In the Eurozone, the European Central Bank cut its benchmark interest rate by 25bps to 3.50% in September, the second rate cut of the year, as inflation slowed to a three-year low of 2.2% in August, down from 2.6% in July. Concerns over slowing economic growth, particularly in Germany and Italy, added pressure on the ECB’s decision. The euro strengthened modestly, gaining 0.79% to end the month at 1.1135.

Meanwhile, in the UK, the Bank of England held off on a second rate cut for the year, awaiting the Labour government's upcoming budget. This decision buoyed the pound, which rallied to its highest level since March 2022, up 1.89% to end the month at 1.3375, making it the best-performing G10 currency year-to-date.

The Reserve Bank of Australia remained cautious, keeping its cash rate at 4.35% since November 2023. The RBA reiterated that rate cuts are unlikely in the near term as it seeks to bring inflation back to its target while maintaining employment gains. The AUD responded positively, climbing 2.19% to 0.6913, its highest level since March 2023. The Bank of Canada continued its easing cycle, cutting the overnight rate for the third consecutive meeting, bringing it to 4.25%. The move was driven by cooling inflation, rising unemployment, and slowing economic activity. The CAD initially declined but recovered to close the month at 1.3525, up 0.24% m/m.

Geopolitical tensions, a weaker USD, and falling yields supported gold prices, which surged 6.23% in September to reach a new all-time high, wrapping up the month at $2,659.40.