Bank of England cuts rates
On 7 November, the Bank of England cut the base rate in the UK to 4.75%, down from 5% previously. The vote was eight in favour, one against. The cut is the result of various factors, including a fall in the previous month’s headline inflation figure to 1.7%, wage inflation falling to 4.9%, and the slightly better than expected future growth of the UK economy (it’s expected to grow by 1% in 2024, and 1.5% in 2025.)
The Governor of the Bank of England Andrew Bailey did flag that they now expect inflation to be slightly higher than expected in 2025, and as such the base rate may fall slightly slower than previously thought. The Bank’s interest rate decision is on 19 December and at the time of writing the expectation is for rates to be held at 4.75%. Investment markets are used to higher interest rates now and did not react to the latest rate cut and commentary.
Inflation goes to 2.3%
While inflation figures for September 2024 fell below the Bank’s 2% inflation target at 1.7% , it then jumped back up to 2.3% in the October figures, proving we are not out of the woods yet from an inflation perspective.
Increasing housing and energy costs contributed to the inflation jump, and this rise will no doubt play into the Bank of England’s decision-making process on interest rates heading into 2025.
FTSE 100 finishes up
The FTSE 100The main stock market index in the UK, the FTSE 100 tracks the performance of the 100 largest companies on the UK stock market. finished the month up 1.35%.1 The fallout from the new Labour government’s budget from a stock marketThe global network of stock exchanges that lets investors buy and sell shares in publicly listed companies. perspective was rather limited, with the main noise coming from opponents of the proposed changes to inheritance tax.
Despite various political and economic headwinds, the UK stock market has performed relatively well so far in 2024 – it’s up 8.41% for the year to 29 November.2 As we’ll see with the US market, it’s important for investors to separate political and geopolitical concerns from investment returns and their financial plan.
S&P 500 follows suit
Across the pond, the S&P 500A stock market index that tracks the performance of the 500 largest companies listed on US stock exchanges. posted a huge gain of 5.30%.3 The lion’s share of this was achieved in the run-up to the US presidential election on 6 November, where the index rose 3.60% between 1 November and 6 November.
You can explore fundsFunds, also called ‘tracker funds’, are financial instruments that have been set up to match or ‘track’ the price of a market index. Investing in a fund lets you get exposure to different financial assets like shares and bonds, without having to buy them directly. for the S&P 500 and more when you open a Stocks & Shares ISA with Moneybox. Click through to explore our fund investments, without having to open an account.
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2024 has been the year of elections, with over 3 billion people expected to have voted around the world including in the UK, India, and the US.
In terms of consequences for our finances, the UK and US elections will likely have the most impact. With Labour’s first budget having come and gone, we are starting to see evidence of their fiscal plans – but there is much more uncertainty about what comes next following Trump’s victory in the US presidential election.
This year has been a reminder that while politics can cause a huge amount of noise and headlines around the world, companies are extremely resilient to politics over the long term.
All investing should be long term. The value of your investments can go up and down, and you may get back less than you invest.
Tax treatment depends on individual circumstances and may be subject to change in the future.
1 Google Finance, 1 November – 29 November, 2024
2 Google Finance, 2 January – 29 November, 2024
3 Google Finance, 1 November – 29 November, 2024