WeekWatch

Stock Take

The S&P 500, a US stock index, broke the 5,000 mark for the first time on Thursday last week.

As has been the case for some time, US technology stocks continued to drive the growth. Chipmaker NVIDIA and Facebook owner Meta have contributed notably this year, as each company’s value has already increased by more than 30% in 2024.

Gains from the so-called ‘Magnificent Seven’ (Microsoft, Apple, Alphabet, Tesla, Amazon, NVIDIA and Meta) have led the way for shares for much of the past year.

Duncan Lamont, Head of Strategic Research at Schroders, points out: “The Magnificent Seven are up 89% since start of 2023, the rest of the world 17%. They make up more of the MSCI All Country World Index than Japan, UK, China, France, and now Canada too, combined.”

However, he adds: “This masks cracks among the seven. They are not a homogenous group in terms of their businesses or share price performance. Three of the seven have underperformed the rest of the market since September.” Notably, Tesla has fallen in value in this period.

Outside of technology, the S&P 500 remained relatively flat. It proved a tough week for many US companies, as wider markets reacted to an interview with US Federal Reserve Chair Jerome Powell, where he lowered any hopes of a March interest rate cut. In the interview, he also reiterated expectations that the Fed will cut about three times this year.

The market has dialled back its rate cut expectations as a result, but still has almost five 0.25% cuts priced by the end of the year, down from nearly seven a month ago.

Looking ahead, US inflation figures are due out on Tuesday. Bloomberg consensus is for a significant drop in headline Consumer Price Index (CPI) inflation from 3.4% to 2.9%, while core inflation (which doesn’t include food or fuel) is expected to decline from 3.9% to 3.7%.

UK inflation figures are due a day later, where markets broadly expect a very minor increase in line with Bank of England forecasts.

Felipe Villarroel, Partner in the Portfolio Management team at TwentyFour Asset Management, noted: “It’s important to keep in mind that both countries showed December CPI prints that were above market expectations, which highlights that the road towards target is unlikely to be a straight line. Markets, and certainly the Fed and the Bank of England, don’t need another surprise next week.”

In terms of what to look for in the statistics, Villarroel said: “We need to see services inflation continuing its downward trend as goods disinflation might be running out of steam. In fact, in the US, it already looks like we have reached the lows on this front.”

The FTSE 100 fell by 0.52% last week, despite some stronger readings of both the UK labour market and increased activity in the Services sector. But there was better news elsewhere.

Japan’s Nikkei 225 index rose 2.04%, rising on yen weakness amid further speculation of a Bank of Japan shift away from their yield curve control policy.

Meanwhile, the Shanghai Composite Index gained 4.97% ahead of the Lunar New Year holiday period. Stocks in China rallied as the government’s latest raft of stimulus measures offset concerns about deepening deflation. Chinese equities have had a tough time in recent months, amid concerns around the Chinese property market, dragging down the wider Emerging Market sector.

In Europe, the German DAX Index managed to reach record highs last week, despite continuing struggles with domestic economic growth. Luxury German companies do lots of trade in China, so are expected to benefit from the Chinese stimulus mentioned earlier.

Wealth Check

We all want to do the right thing by our families. Recent research published by St. James’s Place revealed more than two-thirds (69%) of SJP clients expect to provide some form of financial support for their family at some point.1 And more than a third of those people expected that support to be in the form of an inheritance.

Many of us have received a lump sum inheritance which has helped to achieve some of our long-term life goals. It can change a family’s fortunes, help you become mortgage-free, or send your children or future grandchildren to a good university. But when it comes to passing your own money on to your children and grandchildren, it can be hard to accept that a lot of your money may not reach those you love because of the amount of Inheritance Tax (IHT) payable on your assets.

Knowing when to start planning is key – and saying ‘the sooner the better’ isn’t always helpful. As a rule of thumb, start planning when your savings and assets begin to accumulate. This is often when your day-to-day expenses go down, such as when children leave home, or your mortgage repayments are almost finished.

Keep calm, carry on, start the conversation.

It’s also important to start talking to your family about your plans and being clear about your wishes. Conversations about inheritances and gifts can become emotionally charged – but better to have them now. Gifting can really be quite emotive. Parents may not want to look like they’re favouring one child over another, especially if they’re all at different life stages. So, the larger the family, the more complex the financial planning and decisions become. A financial adviser can help you talk about money as a family.

Having the conversation can often make winding up the estate a little easier after you’ve gone. If you’d like a financial adviser by your side to help start those conversations, do get in touch.

The levels and bases of taxation, and reliefs from taxation, can change at any time. The value of any tax relief depends on individual circumstances.

Source

1Intergenerational Wealth Transfer Survey, SJP and The Wisdom Council, 2023, survey size 887.

In The Picture

Hetal Mehta, Head of Economic Research at St. James’s Place, discusses where interest rates could go in 2024. For the full interview, click here.

https://sjp.getmediamanager.com/video/65ca0dccd48f6e039e5e70e2/53c4e5f5150ba09b0f8b4594?mute=false&autoplay=false&downloadable=false&pageurl=https%3A%2F%2Fpartnership.sjp.co.uk%2Fbarrywells%2Farticle%2Fdetail%2Fsjpp%2Fweekwatch-12-02-2024.html

The Last Word

We’ve been fighting for this all year. The goal has always been to get three [in a row] but you can’t do it without getting two and we’ve had a target on our back all year.

Travis Kelce, Kansas City Chiefs player, celebrates winning back-to-back Super Bowls.

Schroders and TwentyFour are fund managers for St. James’s Place.

The information contained is correct as at the date of the article. The information contained does not constitute investment advice and is not intended to state, indicate or imply that current or past results are indicative of future results or expectations. Where the opinions of third parties are offered, these may not necessarily reflect those of St. James’s Place.

Source: London Stock Exchange Group plc and its group undertakings (collectively, the “LSE Group”). ©LSE Group 2024. FTSE Russell is a trading name of certain of the LSE Group companies.

“FTSE Russell®” is a trade mark of the relevant LSE Group companies and is used by any other LSE Group company under license. All rights in the FTSE Russell indexes or data vest in the relevant LSE Group company which owns the index or the data. Neither LSE Group nor its licensors accept any liability for any errors or omissions in the indexes or data and no party may rely on any indexes or data contained in this communication. No further distribution of data from the LSE Group is permitted without the relevant LSE Group company’s express written consent. The LSE Group does not promote, sponsor or endorse the content of this communication.

© S&P Dow Jones LLC 2024; all rights reserved

Source: MSCI. MSCI makes no express or implied warranties or representations and shall have no liability whatsoever with respect to any MSCI data contained herein. The MSCI data may not be further redistributed or used as a basis for other indices or any securities or financial products. This report is not approved, endorsed, reviewed or produced by MSCI. None of the MSCI data is intended to constitute investment advice or a recommendation to make (or refrain from making) any kind of investment decision and may not be relied on as such.

SJP Approved 12/02/2024