Market Commentary for September 2024
Markets continued to gain ground in September, extending gains from previous months, driven by declining US Treasury yields. The MSCI World Islamic index rose 2.0% in September, marking its fifth monthly increase, bringing its YTD growth to 9.8%1. Similarly, the Dow Jones Sukuk Index saw a monthly return of 1.2%, pushing its YTD return to 5.3%1.
Despite heightened tensions in the Middle East, markets remained resilient. However, gold, known for its safe-haven status, surged to an all-time high, surpassing $2,600 per ounce. Oil prices, on the other hand, experienced a sharp decline, with Brent crude falling 8.9% to $71.8 per barrel due to speculation that Saudi Arabia may raise output to capture a larger market share2.
A key factor driving market confidence in September was the Federal Reserve’s decision to cut interest rates by 50 basis points1, potentially marking the start of a rate-cutting cycle aimed at curbing inflation while addressing a cooling labor market. Investors are now anticipating up to three more rate cuts by year’s end. Despite the easing inflation, the labor market remains stable, with the unemployment rate at 4.2%1. However, signs of economic strain are beginning to surface, as indicated by the US manufacturing PMI dropping to 47.3—its third consecutive month of contraction. The dollar also weakened, falling 1.9% against the British pound1. These indicators reflect the Federal Reserve’s delicate balancing act in managing monetary policy amid slowing economic activity.
In the UK, the Bank of England left interest rates unchanged at 5% in September, following a modest rate cut in its previous meeting1. Inflation remained steady at 2.2% year-over-year, though concerns persist in the services sector1. Meanwhile, UK manufacturing showed mixed signals ahead of the upcoming budget, with the PMI slipping to 51.5 from a two-year high of 52.5 in August. Over in the Eurozone, inflation eased further, dropping from 2.2% to 1.8%, falling below the European Central Bank’s target1. This has fueled speculation of potential rate cuts later in the year as the ECB navigates its monetary policy amid cooling inflation.
China experienced a substantial market rally in September, driven by a broad stimulus package designed to counter its slowing economy. The Shanghai Composite Index surged 17.6%, its biggest weekly gain since 20083. These gains were fueled by major policy measures, including interest rate cuts, mortgage relief for home buyers, and reduced bank reserve requirements4. While these actions are expected to boost short-term activity, long-term challenges persist as China faces slower growth prospects. In Japan, newly elected Prime Minister Shigeru Ishiba signaled his support for continued loose monetary policy to combat deflation and stimulate economic growth, while calling for snap elections5.
As global markets remain sensitive to central bank policies and geopolitical developments, investors are advised to stay cautious and maintain diversified portfolios to navigate potential market volatility.
Sources
- Bloomberg
- (Wilson, 2024)
- (Reuters, China to cut existing mortgage rates by the end of October, 2024)
- (Reuters, China's benchmark stock index posts biggest daily gain since 2008, 2024)
- (Reuters, Japan's new PM urges BOJ to maintain easy monetary policy, 2024)
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As with any investment, a Wahed Invest Ltd investment puts your money at risk, as the value of your investment can go down as well as up. The tax treatment of your investment will depend on your individual circumstances and may change in the future. If you are unsure about whether investing is right for you, please seek expert financial advice.
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