October 2024 Investment Summary

A negative month for the Active range with returns ranging from -0.22% for Active 1 to -0.52% for Active 2 .
*P Acc share class with data sourced from FE analytics as at 31 October 2024 .

October 2024 was a mixed and more volatile month for portfolios generally.

Most major equity markets saw falls in October, with global stocks lowering from all-time highs. Chinese stocks pared back last month’s gains and the Nasdaq and S&P 500 fell from last months near all-time highs, as the S&P 500 ended five months of consecutive gains. Financials and Communications led sector specific performance, while healthcare continued to lag. The FTSE 100’s performance was muted, with lower returns for UK markets following October’s UK budget announcement. The Stoxx Europe 600 Index struggled this month with Industrials and Communication services the only two sectors to register a positive return over the month.

The election race between Kamala Harris and Donald Trump remained on a knife-edge up to election day, as polls showed both candidates tied in key swing states. Government bond prices were higher as the ten-year Treasury yield climbed to 4.28% from 3.74% over the month, with investor focus shifting to the fiscal deficit, which is expected to grow from already elevated levels regardless of who the next US president is. The US economy grew 2.8% in the third quarter of 2024, slowing slightly given the current uncertain political environment. Markets are pricing a further 0.50% of cuts over the remainder of 2024 with a 92% probability of a further cut at the next meeting in November (since confirmed).

US labour market government data this month showed payrolls increased by 12,000 in October, lower than forecasts with the dual hurricanes affecting the payroll collection period. Expectations are for an eventual upward revision at next month’s report. Consumer confidence rose to a six-month high, as household expectations for business conditions and personal finances improved ahead of the US Election. Unemployment data remained at 4.1% its lowest level in three months.

Tensions in the Middle East and the prospect of further escalation in the region remain. Gulf leaders are increasingly frustrated about Israel’s offensives with Oman’s foreign minister recently stating Western powers have a moral obligation to constrain Israel. The IDF offensive against Hizbollah has continued in recent weeks with air strikes in eastern Lebanon. The US has supposedly drawn up a draft plan to end the war, calling for an initial 60-day ceasefire and the withdrawal of the Lebanese militant group and Israeli troops from southern Lebanon. The impact on Brent Crude prices remains limited falling to $73/barrel from $75/barrel in October.

Central banks are striking more dovish tones, following supportive inflation data and some signs of economic softening. The prospect of a soft landing in the US, accompanied by lower interest rates and stimulus in China should be good for the performance of most asset classes, but heightened geo-political tensions remain the most obvious near-term risk to this view. Investors will be awaiting the outcome of the US Election vote having the potential to plot different fiscal and monetary paths for the world’s largest economy.

WS Prudential Risk Managed Active - Tactical asset allocation activity

We currently have an equity overweight of +1.35%, made up of a diversified basket across the US, UK, Asia and GEM. This is funded from European credit and cash underweights. We have also maintained small overweight positions in US Treasuries and real estate (REITs).

Emerging Markets

The fund invests in emerging markets. Generally less well regulated than the UK. There is an increased chance of political and economic instability with less reliable custody, dealing and settlement arrangements. The market(s) can be less liquid. If a fund investing in markets is affected by currency exchange rates, the investment could either increase or decrease. These investments therefore carry more risk.

High Yield Bonds

The fund invests in high yield bonds. High yield bonds carry a greater risk of default than investment grade bonds, and economic conditions and interest rate movements will have a greater effect on their price. Income levels may not be achieved and the income provided may vary.

Value of Investments

The value of investments, and any income can fall, as well as rise, so you could get back less than you invested. Neither capital nor income is guaranteed.

Investments Long Term

Investments should be regarded as long term and are not suitable for money which may be needed in the short term, you should always have a sufficient cash reserve.

Property

The fund invests in Property funds, property shares or direct property. In particular the following risks will apply:- The property market is illiquid and this can, in exceptional circumstances, lead to times in which clients are unable to dispose of part or all of their holding. Property valuations are made by independent agents but are ultimately subjective and a matter of judgement. Property transaction costs are high (typically around 7% due to legal costs, valuations and stamp duty)

Derivative Exposure

The fund invests in derivatives as part of its investment strategy, over and above their use for Efficient Portfolio Management (EPM). Investors should be aware that the use of these instruments can, under certain circumstances, increase the volatility and risk profile of the Fund beyond that expected of a fund that only invests in equities. The fund may also be exposed to the risk that the company issuing the derivative may not honour their obligations which in turn could lead to losses arising.

Umbrella Liabilities

If the liabilities of one fund were to exceed its assets, the other funds within the scheme might have to transfer across money to cover the liabilities.

Solvency of Bond Issuers

If the fund you choose invests in bonds there is a risk that the issuer may default, resulting in a loss to the portfolio.

Returns Are Not Guaranteed

What you receive when you sell your investment is not guaranteed; it depends on how your investments perform.

Inflation

Inflation will reduce the real value of your investments in future.

Taxation and Tax Relief

Levels of taxation and tax relief are subject to change.