Global market dynamics: Insights from key regions

In October 2024, the global capital markets have so far displayed a series of dynamics, with the US leading the charge in market movements while regions like Canada, Japan, Australia, Europe, India, and China each contributed unique narratives to the financial landscape.

This period was marked by a stabilisation in major US indices amidst policy adjustments, corporate earnings, and technological advancements, particularly in the semiconductor sector, setting the stage for both opportunities and challenges for investors worldwide, including those from Zimbabwe looking to navigate these complex waters.

US market performance

Indices review

1. i) SPX (S&P 500): The S&P 500 experienced minor fluctuations but remained largely steady, influenced by a robust jobs report which initially spooked markets with higher-than-expected yields, but later stabilised with adjusted rate cut expectations. At the time of writing this article, the SPX is up 0.85% since last week, rising to 5,827.09 points over the same period.
2. ii) DJI (Dow Jones Industrial Average): Similar to the S&P, the Dow showed resilience, with slight gains reflecting optimism in corporate earnings outside the tech sector. DJI has gone up 1.13% for this week so far reaching 42,989.78 points.

iii) RUT (Russell 2000): Small-cap stocks, tracked by the Russell 2000, saw volatility, indicating mixed investor sentiment towards smaller companies amid economic uncertainties. So far, the RUT is up 4.58% this week hovering around 2,286.75 points.

1. iv) IXIC (Nasdaq Composite): Tech-heavy Nasdaq had a mixed week, with semiconductor stocks like NVIDIA making headlines for advancements in AI technology efficiency, which could bolster sector growth. This week, IXIC has gone up by 0.63% and currently is at 18,314.75 points.

Sector insights:

1. i) Semiconductors: NVIDIA’s Blackwell platform’s efficiency gains points to a continued strength in the semiconductor space, despite earlier concerns over tech spending slowdowns.
2. ii) Banking Sector: Major banks like Citigroup, Bank of America, Goldman Sachs, and JPMorgan Chase reported mixed results. While some showed resilience and growth in certain areas, there’s a cautious approach due to potential rate hikes affecting loan profitability.

iii) ASML’s accidental earnings: On October 15, ASML Holding N.V., a key player in the semiconductor industry, experienced a significant drop in its stock value after it accidentally released its third-quarter earnings a day earlier than intended due to a technical error. This early release revealed weaker-than-expected booking numbers, with bookings dropping over 50% from the previous quarter, which led to a sharp 16% decline in ASML’s stock price. The error resulted in a rapid loss of nearly US$50 billion in market value for ASML within minutes, reflecting investor concerns over the company’s future growth and profitability, and contributed to broader market sell-off sentiments.

2) Global market overview

Canada: Continued to be influenced by commodity prices, especially oil, affecting financials and energy sectors.

Japan: A trim in equity overweight by major investors due to a stronger yen impacting corporate earnings, and mixed signals from monetary policy adjustments.

Australia: Market stabilisation with a focus on iron ore prices and continued recovery in tourism and services sectors.

Europe: Saw varied movements with a cautious approach towards investments, focusing on less tight credit spreads and government bonds for yield stability.

India: Demonstrating robust growth, with market cap increases indicating strong investor confidence in tech and services sectors.

China: A notable surge in market interest, driven by various factors including technology advancements in robotics and green initiatives, alongside a welcoming stance towards global investors.

3) Analysis for Zimbabwean investors and traders

Risk mitigation and capital growth:

1. i) Diversification: Spread investments across sectors, not overly reliant on any single market or asset class. Consider emerging markets like India or stable sectors like renewable energy in China. It is important to also understand the asset valuation and only invest in undervalued securities. Currently, I consider most US stocks to be overvalued.
2. ii) Currency hedging: Given currency fluctuations, especially with a stronger yen affecting Japan’s market, hedging strategies could protect against adverse currency movements.

iii) Interest in technology: The advancements in AI and semiconductors (e.g., NVIDIA’s developments) suggest a sector worth watching for growth opportunities, albeit with an understanding of its volatility.

In my view, the gains and potential risks have not been fully ascertained so I am only investing in the sector through Exchange traded Funds that track the Nasdaq and S&P 500 Index..

4) Key upcoming events:

US economic data: Watch for further employment data, inflation reports, and Fed’s statements on rate adjustments. These could sway markets significantly.

Global policy announcements: From Japan’s monetary policy to China’s economic stimulus packages, these could offer insights or opportunities for quick market movements.

As we synthesise the week’s events across global markets, the picture for investors, especially those from Zimbabwe, becomes clearer yet more intricate.

The resilience shown by US markets, the cautious optimism in Europe, and the growth spurts in Asia-Pacific regions underscore the necessity for diversified investment strategies and a keen eye on geopolitical and economic events.

For Zimbabwean investors, embracing technology sectors like AI and semiconductors while managing risks through diversification and currency hedging could pave the way for capital protection and growth.

However, the key will remain agility in adapting to both local and global financial shifts, ensuring that investments are not only about growth but also about safeguarding against potential downturns in this ever-evolving market environment.

• Isaac Jonas is a Canada-based economist and consultant at Streetwise Economics. He is also a retail investor and retail trader, focusing mainly on the US and Canadian capital markets. He regularly shares insights via his social media handles. His website is www.streetwiseeconomics.com and can be reachable on isacjonasi@gmail.com. Insights shared in this article do not amount to investment advice.