Pension and Financial Markets Performance Update: Q2 2024

As temperatures soar and people’s attention turns to the summer holidays, stock markets across the world reminded us in the second quarter of 2024 that they are far from ready to start winding down just yet.

Despite political volatility and upcoming elections in the UK and US, Q2 2024 saw share prices increase significantly. European stocks went up too, before returning to where they started at the beginning of Q2.

Remember, while these short-term movements can be interesting to follow, it’s important to stay focused on your long-term financial goals. Our aim is to keep you informed without letting the ups and downs distract from your long-term plan.

Having said that, let’s get into the weeds of the global stock market – before also looking at how Penfold funds have performed this quarter.

Growth in the US Leads to a New World’s-Most-Valuable Company

For the third quarter in a row the S&P 500 – which tracks the performance of America’s biggest 500 companies – has motored upwards. It powered to an almost 4% return over Q2 2024.

This is largely thanks to the phenomenal growth of the so-called Magnificent Seven stocks, including Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia and Tesla.

Crucial to the rise in the US equity market was the blistering performance of chipmaker Nvidia, whose share price grew by so much this quarter that it became the world’s most valuable company. Over the past five years, its share price has increased by more than 3,000%.

While there were lots of winners in the US in terms of share price gains over the last three months, Nike was one of the few major casualties. Its shares had the biggest ever one-day fall since the sportswear company went public in 1980 after its stocks fell almost 20% at the end of June. The drop came after Nike said it expects sales to decrease by a tenth.

Good Performance in the UK – and Finally a Cut in Interest Rates?

In the UK, the FTSE 100 – which tracks the performance of the UK's 100 biggest companies –  jumped 2.7% and bucked the notion that a long and drawn out election campaign would cause investors to hunker down and take the wind out of the sails of the UK stock market.

The waiting game over interest rates continues in the UK. Many investors anticipated that the first cut since March 2020 would come in June but the Bank of England again decided to hold rates at 5.25% at its most-recent meeting.

But, nevertheless, hopes of an imminent cut helped push the FTSE 100 higher in the second quarter as, in general, interest rate reductions decreased the cost of borrowing for companies, which in turn is good news for share prices.

Due to heightened security fears because of tensions between Russia and Ukraine, and Israel and Palestine, countries have increased their defence spending. This was particularly advantageous for Rolls Royce, one of largest providers of defence aero-engine products.

And Broker Hargreaves Lansdown, which was the subject of a takeover offer, also saw significant success this quarter.

The next quarter could be even better for the FTSE 100, with the vast majority of economists and financial experts suggesting the Bank of England will finally cut interest rates. This will be the first movement – either up or down – for 10 months.

Michael Saunders, an MPC member at the Bank of England between 2016 and 2022, told Reuters that the Bank of England is likely to cut interest rates soon, "probably in August". Michael expects “two to three cuts this year.”

Rising Shares in Europe… Return to Where They Started

The pan-European Stoxx 600 index – which tracks the performance of 600 companies across Europe – finished the quarter more or less flat.

There were big gains at the beginning of June after the European Central Bank cut interest rates for the first-time in five years to 3.75% but shares fell back to where they started by the end of the three months.

The interest rate decrease came after the European Central Bank policy makers said underlying inflation had eased, “reinforcing the signs that price pressures have weakened”.

One of the biggest winners in Europe was Denmark's Novo Nordisk, the health care giant that became Europe’s biggest company last year. Its share price increased by more than 40% so far this year, on top of gains of almost 50% in 2023 thanks to the success of its weight-loss drug Wegovy.

While these movements are notable, it’s important to remember that market fluctuations are normal. Keeping an eye on long-term trends and maintaining a steady course with your investments can be more beneficial than reacting to short term changes.

How Did Your Penfold Pension Perform in Q2 2024?

At Penfold, we have five types of plan, including Standard, Sustainable and Sharia. Our funds are built on strategically diversified portfolios designed to decrease risk exposure, limit potential losses and improve overall investment performance – and they all made gains during the second quarter.

As with any investment, your capital is at risk. The value of your investment can go down as well as up, and you may get back less than you invest. This information should not be regarded as financial advice and past performance is not a reliable indicator of future performance.

Let’s take a look at how our plans performed over this quarter.

Our Standard plans all saw growth in Q2:

• Risk level 1 rose by 1.0%
• Risk level 2 grew by 1.5%
• Risk level 3 rose by 1.9%
• Risk level 4 rose by 2.5%

Our Sharia plan, which invests in companies that comply with Islamic finance principles, rose by 8.0% between the end of March and June.

And our Sustainable plans, which prioritise green and ethical options, also performed well between the end of March and June:

• Risk level rose by 1.0%
• Risk level 3 rose by 1.8%
• Risk level 5 rose by 2.5%

While it’s encouraging to see these positive results, remember that investing is a marathon, not a sprint. Staying focused on your long-term goals will help ensure a smoother journey to retirement.

Penfold fund performance vs. benchmarks

When evaluating how well a fund is performing, it can be useful to compare it against a benchmark – an industry standard or reference point. For instance, if your fund achieves a return of 8% and the benchmark return is 6%, it’s outperforming by 2%.

The following chart shows how Penfold’s fund performance compares to a benchmark of
 CPI inflation + performance percentage in the period 1 April 2024 to 30 June 2024:

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