Quarter in Review Q2 2024

Key themes

Global equities broadly rallied over the second quarter, buoyed by a combination of prospective monetary easing later in 2024 and continued optimism around artificial intelligence (AI) and its potential to increase corporate profits.
In Europe, there was increased volatility around the surprise announcement of a snap parliamentary election in France and a potential victory for the far-right National Rally. Meanwhile, the European Central Bank (ECB) cut interest rates for the first time since 2019, although both the ECB and the Federal Reserve (Fed) suggested that policy rates may need to stay ‘higher for longer’ to get inflation back to target.
While inflation remained somewhat sticky, global activity data was mixed amid signs of slowing in the US and improved activity in the Eurozone. Bond yields were pushed higher.

Markets snapshot

The MSCI All Country World index rose by 3.5% (3.8% in euros) over the quarter, with a supportive backdrop of potential rate cuts from major central banks in the coming months and continued optimism over the artificial intelligence theme.
Small cap equities fell by 1.9% (-1.9% in euros), amid higher bond yields, which could hamper small caps.
Emerging market (EM) equities were up by 6.3% (5.9% in euros) over the quarter. The asset class was supported by positive sentiment towards technology stocks, which was reflected in a 16.8% rise in the MSCI Taiwan.
Eurozone government bond prices were lower as the magnitude of expected 2024 ECB rate cuts was reduced. The ICE BofA 5+ Year Euro Government bond index fell by 2.3% as German 10-year yields rose from 2.30% to 2.50%. The equivalent French government bond yield rose from 2.81% to 3.30% over the period amid increased political risks.
European investment grade (IG) corporate bonds returned 0.1% over Q2, supported by income yield, which offset capital losses. Global high yield bonds returned 1.2%, with yields up slightly over the quarter.

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