Interim Market Update (Quarter 3 - 2024) 

Shreemati Varadarajan

Chief Investment Officer - Synergy Financial Advisers

 

1. Fed's Recent Rate Cut

The Federal Reserve's recent decision to cut interest rates by 50 basis points aims to support the labour market amid rising unemployment. While this might influence short-term market movements, including a steeper yield curve and sector-specific changes, it is essential to reassure clients that this action is part of the Fed’s broader economic strategy and not a signal for immediate adjustments to their investment portfolios.

 

   2. U.S. Presidential Elections

With the U.S. presidential election on the horizon, clients may be concerned about its potential market impact. Historically, while elections can lead to short-term market fluctuations, they have limited long-term effects on overall market performance. Emphasize to clients that broader economic factors, such as global trends and technological advancements, typically drive long-term market behaviour.

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Guidance for Advising Clients:

 

• Encourage a Steady Approach: The Fed’s rate cut and the election are isolated events that do not necessarily require immediate changes to portfolios. Advise clients to avoid making abrupt adjustments based on these developments, as this can introduce unnecessary risks.

• Emphasize Strategic Asset Allocation: Reinforce the importance of maintaining a strategic asset allocation that aligns with global benchmarks. While short-term volatility is a natural part of investing, a well-thought-out investment plan will provide a stable foundation for long-term success.

• Focus on Business Fundamentals: Reassure clients that the performance of their investments relies more on strong business fundamentals than on short-term political or economic events. Diversification and solid business principles will help them navigate market fluctuations effectively.

• Align with Financial Plans and Risk Profiles: By guiding clients with a balanced and strategic approach, you can help them manage short-term volatility while staying aligned with their financial plans and risk profiles. Emphasize that portfolio adjustments should be made in the context of their long-term financial goals and risk tolerance, ensuring they remain on track to achieve their overall objectives.

 

Summary:

 

While U.S. presidential elections often attract attention, historical data indicates their long-term impact on markets is limited. The most prudent approach is to focus on strategic asset allocation aligned with global benchmarks rather than reacting to short-term political events. Encouraging clients to stay on track with their long-term financial goals can lead to more consistent results over time.​ This approach will help clients navigate current market conditions confidently and maintain focus on their long-term financial goals.