Executive Summary

Global financial markets advanced during September 2024 as declining inflation, the beginning of the Federal Reserve's interest-rate-cutting cycle and substantial new economic support from China strengthened investor confidence. The month began with concern about weaker economic activity and pressure on technology shares, but sentiment improved considerably following central-bank decisions and China's late-month stimulus announcements.

The Federal Reserve delivered a larger-than-usual reduction of 0.50 percentage points, lowering the federal funds target range to 4.75%–5.00%. The move represented the first US interest-rate cut since March 2020 and reflected greater confidence that inflation was moving towards target, alongside increased concern about further weakening in the labour market.

Chair Jerome Powell emphasised that the reduction was intended to preserve economic strength rather than respond to an existing recession. Updated projections suggested that policymakers expected further gradual easing before the end of the year, although future decisions would remain dependent upon inflation and employment data.

US equity markets responded positively. The S&P 500, Nasdaq Composite and Dow Jones Industrial Average all advanced, with the S&P 500 reaching additional record highs. Market participation broadened beyond mega-cap technology as utilities, industrials, financials and selected smaller companies benefited from lower interest-rate expectations.

The European Central Bank reduced its deposit rate for the second time in 2024 as eurozone inflation moderated and regional growth remained weak. European equities produced mixed returns, with improving monetary conditions offset by continued manufacturing weakness and political uncertainty.

The Bank of England maintained Bank Rate at 5.00% following its August reduction. Policymakers adopted a cautious position because services inflation and wage growth remained above levels consistent with lasting price stability.

China produced the month's most dramatic market development. The People's Bank of China announced reductions in reserve requirements and key policy rates, while authorities introduced measures intended to support mortgages, property markets and equity valuations. Chinese and Hong Kong shares surged during the final week of September.

Government bonds generally advanced as investors anticipated a broader easing cycle. The US yield curve moved away from the deep inversion that had characterised much of the previous two years, while European yields declined in response to weak economic data.

Gold reached additional record highs as lower interest rates, central-bank demand and geopolitical risk supported investment. Oil moved in the opposite direction, declining sharply amid concern about global demand and the prospect of increased supply.

Key Themes During September

• The Federal Reserve began its easing cycle with a 50-basis-point reduction.
• The ECB delivered its second interest-rate cut of 2024.
• The Bank of England held Bank Rate at 5.00%.
• US equities reached further record highs.
• Equity-market participation broadened beyond mega-cap technology.
• China introduced a substantial monetary and property-support package.
• Chinese and Hong Kong equities rallied sharply late in the month.
• Government bond yields generally declined.
• Gold reached new record levels while oil prices weakened.
• Private-market investors anticipated improving financing conditions.

Global Economic Overview

The global economy remained on a path of gradual disinflation during September. Economic growth was uneven, with the United States remaining comparatively resilient, Europe close to stagnation and China continuing to experience weak household and property demand.

United States

The US economy continued to expand, although the labour market showed clearer signs of cooling. Employment growth had moderated, unemployment remained above its 2023 low and job vacancies continued to decline.

Consumer spending and service-sector activity remained comparatively resilient. This supported the Federal Reserve's view that the economy was not in recession, even though restrictive monetary policy was reducing demand.

Federal Reserve

The Federal Open Market Committee reduced its policy range by 0.50 percentage points to 4.75%–5.00%. Most market participants had expected a cut, but opinion had been divided between a conventional quarter-point move and the larger reduction ultimately delivered.

The Federal Reserve explained that inflation risks had diminished while risks to employment had increased. Policymakers sought to prevent unnecessary labour-market deterioration after maintaining rates at restrictive levels for more than a year.

Updated projections indicated that most officials expected further easing during 2024 and 2025. Nevertheless, Powell rejected the idea that every subsequent meeting would necessarily produce another half-point move.

US Inflation

Consumer-price inflation continued to decline on an annual basis. Goods prices remained subdued, while housing and labour-intensive services represented the most persistent components.

The Federal Reserve's preferred personal consumption expenditures measure also moved closer to target. Policymakers were increasingly confident that wage and price pressure could moderate without a severe economic contraction.

Eurozone

Eurozone economic activity remained weak. Manufacturing contracted, Germany's industrial economy continued to struggle and business surveys indicated limited momentum across the region.

The European Central Bank reduced its deposit facility rate to 3.50%. It also implemented changes to its operational framework, narrowing the spread between the deposit rate and the main refinancing rate.

Inflation declined substantially, assisted by lower energy costs. However, services inflation and wage growth remained stronger than the headline figure, encouraging the ECB to maintain a meeting-by-meeting approach.

Germany

Germany remained among the weakest major developed economies. Automotive, chemical and machinery producers faced subdued export demand, high energy costs and increasing competition from China.

Structural concerns extended beyond the normal business cycle. Ageing infrastructure, slow planning processes, demographic pressure and limited domestic investment affected the longer-term outlook.

United Kingdom

The Bank of England maintained Bank Rate at 5.00% by an 8–1 vote. One Monetary Policy Committee member preferred an immediate reduction to 4.75%.

The Bank also confirmed that it would reduce its stock of government bonds by £100 billion over the following twelve months through maturities and active sales.

UK headline inflation remained close to target, but services inflation and wage growth continued to concern policymakers. Markets therefore expected a gradual rather than rapid easing cycle.

Japan

The Bank of Japan maintained its short-term rate at approximately 0.25% following the increase delivered in July. Policymakers continued to expect gradual normalisation if wages and inflation developed in line with forecasts.

The yen remained volatile but avoided the disorderly movements experienced during July and August. Investors continued to assess the risk that additional rate increases could trigger further carry-trade unwinding.

China

China's economic indicators remained weak for much of September. Property sales and prices continued to decline, consumer confidence remained subdued and manufacturing surveys provided limited evidence of a strong recovery.

Authorities responded with a coordinated support package. Measures included a reduction in banks' reserve-requirement ratio, lower short-term policy rates, reduced mortgage costs and additional assistance for the equity market.

Officials also signalled greater determination to stabilise the property sector and meet the government's growth objective. The scale and coordination of the announcements surprised markets and produced a rapid improvement in sentiment.

Global Outlook

The start of the US easing cycle improved the probability of a soft landing. Lower borrowing costs could support housing, investment and refinancing, while declining inflation increased real household purchasing power.

Risks remained significant. A rapid deterioration in employment could transform preventive rate cuts into a response to recession, while geopolitical conflict or commodity disruption could revive inflation.

Equity Markets

Global equities advanced during September. US indices reached further record highs, while Chinese markets produced exceptional late-month gains following the government's support package.

United States

The S&P 500 gained approximately 2%, recording another positive month despite weakness during the opening week. The Dow Jones Industrial Average and Nasdaq Composite also advanced.

The Federal Reserve's half-point reduction supported rate-sensitive sectors and improved expectations for corporate financing. Utilities, industrials, consumer discretionary companies and selected financials contributed to broader market participation.

Technology remained an important source of earnings growth but did not dominate the month to the same extent as during the first half of the year. Semiconductor shares experienced volatility as investors assessed high valuations and the timing of returns from artificial-intelligence investment.

Small and Mid-Capitalisation Companies

Smaller companies benefited from the prospect of lower borrowing costs. Their balance sheets were generally more sensitive to floating-rate debt and refinancing conditions than those of cash-rich mega-cap businesses.

Performance remained uneven because weaker companies also faced greater exposure to a potential economic slowdown. Investors favoured profitable businesses with manageable leverage and strong domestic demand.

Europe

European equities produced mixed returns. Lower ECB rates supported banks, property and domestic businesses, but weak economic surveys limited enthusiasm.

Technology and industrial companies remained sensitive to global demand and China. Luxury-goods shares rallied late in the month as Chinese stimulus improved expectations for consumer spending.

United Kingdom

UK equities advanced modestly. Domestically focused businesses benefited from expected monetary easing and improving political stability after the July election.

Mining companies received late-month support from China's stimulus package, while energy shares were constrained by lower oil prices.

Japan

Japanese equities produced mixed performance as the yen, Bank of Japan policy and global technology sentiment influenced returns. Banks remained supported by gradual monetary normalisation, while exporters faced uncertainty regarding currency movements.

China and Hong Kong

Chinese and Hong Kong equities surged during the final week of September. The Hang Seng Index, CSI 300 and other benchmarks recorded substantial gains as investors responded to monetary easing and direct measures intended to support equity purchases.

Property developers, consumer companies, brokers and internet platforms were among the strongest performers. Low valuations and substantial short positioning amplified the rally.

The sustainability of the advance depended upon whether policy announcements produced a lasting recovery in household confidence, property activity and corporate earnings.

Emerging Markets

Emerging-market equities advanced as lower US rates weakened the dollar and improved capital-flow expectations. China's rally made a significant contribution because of its large weight within major indices.

Indicative September Performance

Fixed Income Markets

Government bonds generally advanced during September as the Federal Reserve and ECB reduced interest rates. Shorter-dated securities benefited particularly from expectations of further policy easing.

US Treasuries

US Treasury yields declined ahead of the Federal Reserve decision and remained lower after the half-point cut. The two-year yield was especially sensitive to expectations for further reductions.

The yield curve continued to normalise after a prolonged inversion. This reflected expected monetary easing, although investors remained alert to the historical association between curve normalisation and economic slowdown.

European Government Bonds

German Bund yields declined as the ECB cut rates and weak business surveys increased expectations of further action. French and Italian spreads remained contained, although fiscal risks continued to require attention.

UK Gilts

UK gilt performance was comparatively stable. The Bank of England's decision to hold rates had been widely expected, while investors continued to price another reduction before year-end.

Japanese Government Bonds

Japanese government-bond yields remained sensitive to expectations for future Bank of Japan increases. The central bank's cautious communication reduced immediate concern about rapid tightening.

Corporate Credit

Investment-grade and high-yield bonds benefited from lower government yields and constructive risk appetite. Credit spreads remained tight, indicating limited expectation of a broad default cycle.

The low level of spreads reduced the protection available against future deterioration. Investors continued to favour issuers with strong cash flow and manageable maturity schedules.

Private Credit

The beginning of the easing cycle improved the future interest-coverage outlook for floating-rate borrowers. Relief would occur gradually, however, and highly leveraged companies continued to face substantial current interest expense.

Competition among direct lenders remained strong for high-quality transactions, placing pressure on spreads and lender protections.

Foreign Exchange

Currency markets responded to the Federal Reserve's policy change and China's stimulus programme. The dollar weakened during much of the month, while several emerging-market currencies strengthened.

US Dollar

The dollar declined as US interest rates moved lower and investors anticipated further easing. Reduced yield support was partly offset by the continued resilience of the US economy.

Euro

The euro remained relatively stable against the dollar. The ECB reduced rates, but the Federal Reserve's larger move limited the change in the relative policy outlook.

Sterling

Sterling strengthened against the dollar as the Bank of England maintained rates and signalled a gradual approach to easing. The UK's comparatively high yields remained supportive.

Japanese Yen

The yen traded within a wide range. Expectations of future Bank of Japan tightening provided support, while cautious central-bank communication limited appreciation.

Chinese Renminbi

The renminbi strengthened following the stimulus announcements and improvement in equity-market sentiment. Lower US yields also reduced pressure on the currency.

Emerging-Market Currencies

Many emerging-market currencies benefited from the weaker dollar and increased global liquidity. Domestic political and inflation conditions nevertheless remained important sources of differentiation.

Commodities

Commodity markets produced mixed returns during September. Gold reached new records, while oil declined sharply. Industrial metals recovered late in the month following China's stimulus announcements.

Oil and Energy

Crude-oil prices declined as markets focused on weak demand growth in China and the possibility that OPEC+ would eventually return additional production.

Geopolitical tension in the Middle East provided intermittent support, but had not produced a sustained interruption to global supply.

Gold

Gold reached additional record highs as the Federal Reserve began cutting rates. Lower yields reduced the opportunity cost of holding the metal.

Central-bank purchases, geopolitical uncertainty and investor demand for diversification remained important sources of support.

Copper and Industrial Metals

Copper and other industrial metals initially remained under pressure from weak Chinese demand. Prices rebounded late in the month as investors anticipated that monetary and property support would improve activity.

The longer-term demand outlook remained connected to electricity grids, renewable energy, electric vehicles and data-centre construction.

Iron Ore

Iron ore recovered as Chinese property and infrastructure support improved expectations for steel demand. The sector remained constrained by excess housing inventory and weak private development.

Agricultural Commodities

Agricultural prices were mixed. Weather and harvest expectations affected grain markets, while cocoa and coffee remained supported by regional supply difficulties.

Commodity Overview

Digital Assets

Digital assets advanced during September as lower US interest rates improved liquidity expectations and risk appetite.

Bitcoin

Bitcoin gained during the month, reversing the historically weak seasonal pattern often associated with September. Spot ETF flows improved and lower bond yields supported demand for alternative assets.

The market remained volatile and sensitive to macroeconomic expectations. Investors continued to monitor government holdings, miner sales and institutional allocations.

Ethereum

Ether produced a more subdued return. Spot ETF demand remained below the strongest expectations, while the absence of staking rewards reduced the attractiveness of the funds relative to direct ownership.

Institutional Adoption

Financial institutions continued developing tokenised funds, deposits and settlement infrastructure. Regulated tokenisation remained distinct from speculative investment in unbacked digital assets.

Risk Considerations

• Digital assets remained sensitive to global liquidity.
• ETF flows could change rapidly.
• Ethereum continued to face competition from alternative networks.
• Regulatory treatment of staking and many tokens remained uncertain.

Private Equity

Private-equity sentiment improved during September as the Federal Reserve began reducing rates and public markets remained strong. Lower base rates offered the prospect of gradual relief for acquisition finance and existing floating-rate borrowers.

Deal Activity

Mid-market transactions remained active within healthcare, software, business services and specialised industrial sectors. Larger transactions became more achievable as syndicated debt markets improved.

Financing

The Federal Reserve's cut reduced benchmark borrowing costs, although the full benefit would take time to reach borrowers. Banks and private lenders continued competing for stronger transactions.

Sponsors generally maintained more conservative leverage than during the low-rate period. Investment cases continued to rely on operating performance rather than inexpensive debt.

Exits

Strong public markets supported preparations for IPOs, but the listing environment remained selective. Trade sales and sponsor-to-sponsor transactions continued to provide more dependable routes.

Fundraising

Fundraising remained concentrated among established managers. Limited partners continued to prioritise distributions, realised performance and co-investment access.

Secondaries

Secondary activity remained strong as investors sought liquidity and portfolio management. Mature funds with visible exits attracted the strongest demand.

China and Asia

China's stimulus package improved market sentiment, but international private-equity investors remained cautious about regulation, exit routes and domestic growth.

CE Global Private Equity Observations

• Lower base rates improved the future financing outlook.
• Mid-market activity remained more resilient than mega-buyouts.
• Operating improvement remained central to value creation.
• Exits and distributions continued to determine fundraising conditions.
• Secondaries remained an important source of liquidity.

Artificial Intelligence & Technology

Artificial intelligence remained a leading investment theme, while markets increasingly focused on adoption, infrastructure capacity and financial returns.

Semiconductors

Demand for advanced processors and high-bandwidth memory remained strong. Semiconductor shares experienced volatility, however, because valuations assumed continued exceptional growth.

Cloud Infrastructure

Major cloud providers continued spending heavily on data centres, networking and processors. Investors required evidence that enterprise demand would produce adequate returns on this capital.

Enterprise Adoption

Businesses increasingly deployed AI within software development, customer support, research and document processing. Adoption remained constrained by data quality, security and reliability.

Data Centres and Power

Electricity availability remained a major constraint. Demand continued to increase for grid connections, transformers, cooling equipment and reliable generation.

Cybersecurity

Generative AI increased the sophistication of phishing, fraud and impersonation. Identity verification, cloud security and data protection remained priority investment areas.

Technology Risks

• Valuations remained dependent on exceptional growth.
• Infrastructure spending could exceed near-term revenue.
• Electricity and planning delays could restrict expansion.
• Copyright and privacy disputes remained unresolved.
• Enterprise adoption could develop more slowly than expected.

Sector Spotlight

Chinese Consumer and Internet Businesses

September's sector spotlight examines Chinese consumer and internet companies following the government's substantial economic-support package.

Valuation Background

Chinese equities had traded at substantial discounts to US and other developed markets after several years of regulatory intervention, property weakness and disappointing growth.

Low valuations created the potential for a powerful recovery when authorities announced policies intended to improve liquidity and confidence.

Internet Platforms

Large internet companies had strengthened cash flow, reduced costs and increased share repurchases. Their established user bases and digital ecosystems remained valuable despite slower economic growth.

Consumer Demand

Household confidence remained the principal challenge. Falling property values affected perceived wealth, while employment uncertainty encouraged higher savings.

A sustainable recovery required policies that improved income expectations and reduced concern about housing rather than supporting asset prices alone.

Travel and Services

Travel, entertainment and local services offered selective opportunities as consumers prioritised experiences over major property-related expenditure.

Principal Risks

• Stimulus could generate only a temporary market rally.
• Property weakness could continue to restrict consumption.
• Regulatory policy could change with limited notice.
• Trade restrictions could affect technology and manufacturing.
• International investors continued to face geopolitical risk.

Investment Perspective

Chinese consumer and internet companies offered substantial valuation upside if policy support restored confidence. Investment selection remained essential because economic weakness and regulatory uncertainty had not been eliminated.

Regulatory Update

Regulatory developments during September focused on artificial intelligence, digital markets, private funds and financial stability.

Artificial Intelligence

Businesses continued preparing for the staged requirements of the EU Artificial Intelligence Act. Organisations developed system inventories, risk classifications and governance responsibilities.

Generative-AI Competition

Competition authorities in the European Union, United Kingdom and United States continued examining partnerships between major technology companies and model developers.

Areas of concern included cloud exclusivity, access to processors, data concentration and the ability of smaller developers to compete.

Digital Assets

European digital-asset businesses continued adapting to the Markets in Crypto-Assets framework. Stablecoin issuers faced requirements concerning reserves, governance and redemption.

Private Funds

Private-fund managers continued to face scrutiny concerning fees, valuation, side letters and continuation-vehicle conflicts. Transparent processes remained essential where managers influenced both buyers and sellers.

Financial Stability

The easing cycle increased attention on leverage accumulated during the high-rate period. Regulators monitored private credit, commercial real estate and connections between banks and non-bank lenders.

Compliance Priorities

• Maintain an inventory of AI use across the organisation.
• Document human oversight and risk controls.
• Review cloud and AI partnerships for concentration risk.
• Assess digital-asset activities under MiCA requirements.
• Maintain independent private-asset valuation governance.
• Monitor leverage and refinancing risk across portfolios.

Looking Ahead

Markets entered October with confidence that the global monetary cycle was becoming more supportive. The principal questions concerned the speed of further Federal Reserve easing, the effectiveness of China's stimulus and the resilience of corporate earnings.

Federal Reserve

Employment and inflation data would determine whether the Federal Reserve followed its half-point reduction with a smaller move or another substantial cut.

A gradual slowdown would support the soft-landing outlook. Severe labour-market weakness could increase recession concern, while renewed inflation could limit further easing.

European Central Bank

Weak activity increased the probability of additional ECB reductions. Policymakers would continue monitoring services inflation and wages.

Bank of England

The Bank of England was expected to reduce rates gradually. Services inflation remained the main obstacle to a faster cycle.

China

Investors would assess whether the stimulus package translated into stronger property sales, household spending and credit growth.

Additional fiscal measures could be required to sustain the equity-market rally and achieve the government's economic-growth objective.

Corporate Earnings

Third-quarter earnings would test whether equity valuations remained justified. Technology companies would face continued scrutiny of AI expenditure and monetisation.

US Election

The approaching US presidential and congressional elections would increase attention on taxation, tariffs, fiscal policy and regulation.

Geopolitics

Conflict in the Middle East and Ukraine remained significant risks to energy markets, supply chains and investor confidence.

Private Markets

Lower benchmark rates could improve refinancing and deal activity. Sponsors would nevertheless need to avoid assuming a rapid return to the financing conditions of the previous decade.

CE Global Private Equity Perspective

September represented an important transition from restrictive monetary policy towards gradual easing. The change should support financing and valuations, but its benefits will vary according to leverage, business quality and economic sensitivity.

China's intervention demonstrated the potential for policy to create rapid market movements. Sustainable returns will depend upon improvement in underlying demand rather than liquidity support alone.

CE Global Private Equity believes that attractive opportunities remain in infrastructure, cybersecurity, healthcare, specialist technology and businesses benefiting from lower financing costs. Entry valuations and capital structures remain essential considerations.

Investors should maintain diversification and liquidity as monetary policy, elections and geopolitical events create potential volatility. A disciplined approach remains preferable to assuming that rate cuts will support all assets equally.

This market review is provided for general information and discussion purposes only. It does not constitute investment, legal, tax or other professional advice, nor an offer or solicitation to purchase or sell any security, financial instrument or investment product. Market values can rise or fall, and past performance is not a reliable indicator of future results.