Despite experiencing volatility in Q3 2024, markets demonstrated resilience with largely positive returns. The decrease in liability discounting rates in Q3 compensated these good performances, and funding ratios have been mostly stable over the period, still at comfortable levels.
Market review: Resilience despite some volatile periods
The third quarter of 2024 was characterised by a generally positive performance across most asset classes, with both equities and bonds delivering robust returns despite a volatility spike in August. Between June and October, the MSCI World Equity Index rose by +4.3% in net USD terms, with US equities leading the charge. The S&P 500 gained +5.9% in Q3, reaching an all-time high in mid-October before a sell-off at the end of the month. This upward momentum was supported by strong corporate earnings, particularly in the financial sector, which exceeded market expectations.
In the bond markets, the evolution of long-term interest rates played a crucial role in shaping market dynamics. Throughout Q3, US Treasury yields for long-term bonds experienced a significant decline, with the 10-year yield falling from 4.40% at the end of June to 3.78% by the end of September. This decline was largely driven by the Federal Reserve’s decision to cut rates by 50 basis points in September, signaling a more accommodative monetary policy stance in response to weakening economic indicators. However, in October, stronger-than-expected economic data led to a reassessment of future rate cuts, with the 10-year yield rising to approximately 4.3% by the end of the month. This shift reflected growing concerns about inflation and the potential for a more aggressive monetary policy stance moving forward.
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