Quarter in Review Q3 2024

Key themes

Global equities rose to new all-time highs in the third quarter, supported by global monetary easing, which also helped push bond yields lower.
The Federal Reserve (Fed) began its easing cycle with a larger-than-expected cut in its key rate in September, and guided for further cuts this year and next, while the European Central Bank (ECB) eased policy further and China announced stimulus measures.
Global activity data was somewhat mixed in Q3, but an economic soft landing was still the base case. A volatility event in August was triggered by soft US labour market data, which raised recessionary fears, but subsequent data suggested activity remained robust.

Markets snapshot

The MSCI All Country World index rose by 5.0% (2.5% in euro terms) over the quarter, with a backdrop of falling interest rates and a likely soft landing supporting global equities, which moved to new all-time highs, quickly recovering from the August volatility event.
Small cap equities rose by 6.8% (5.2% in euros) amid lower bond yields, which could be supportive for small caps given their higher leverage levels and larger share of variable-rate borrowings.
Emerging market (EM) equities rallied by 6.8% (4.6% in euros) over the quarter. The asset class was supported by stimulus measures from China, with the MSCI China up by 22.4% (18.7% in euros).
Eurozone government bond prices were higher, with the magnitude of expected 2024 rate cuts from the ECB increasing. The ICE BofA 5+ Year Euro Government bond index returned 5.0% as German bund 10-year yields declined from 2.50% at the end of Q2 to 2.12%,
European investment grade (IG) corporate bonds returned 3.3%, supported by income yield and capital gains from declining yields. Global high yield bonds returned 4.1% in Q3, with yields falling by 70bps to 6.23%.

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