CFS Market Update: October 2024 

• On 5 November, the RBA held firm on its stance to keep rates on hold at 4.35%
• The US Federal Reserve (Fed) cut rates by 25 basis points, as it makes progress in tackling inflation 
• The European Central Bank (ECB) cut rates and markets anticipate more are on the way 
• Republican Party presidential candidate, Donald Trump, wins the US election 
• US markets react strongly to election outcome certainty 
• Early signs that China’s stimulus is starting to stabilise its economy. 

The RBA did not meet in October, however Governor Bullock’s continued message to Australians has been that inflation is still too high. So, it was no surprise that the central bank held firm for its 5 November decision, where it left the rate at 4.35%. The RBA has kept rates on hold since November 2023. 

“This last part … of getting inflation down is not easy nor straightforward,” RBA Governor Michele Bullock said during the media conference following the rate announcement. 

“We need to see more progress on underlying inflation coming down. We’re watching the data closely and we’re not ruling anything in or out. The underlying inflation that we’re experiencing is still sitting at around about 5% for services – that’s still a significant amount of inflation in the system.”  

The RBA’s last meeting of 2024 will be held on 10 December. Market experts anticipate that a rate cut is more likely in the first half of 2025; some are still predicting this could be as early as February. 

Following its September meeting, the Fed made a unanimous decision to cut rates for the second time in a row for its 7 November decision, from 4.75% to 4.5%. Fed chair Jerome Powell said he was “feeling good” about the US economy, as inflation has eased substantially from a peak of 7% to 2.1% as of September 2024. 

Its last meeting of the year will be held on 18 December. 

On 17 October, the ECB decided to cut by 25 basis points, bringing its key interest rate down to 3.25%. ECB President Christine Lagarde stated that the Eurozone has made progress in tackling inflation and on track to hit the central bank’s medium-term target of 2% in 2025. The central bank will make its final rate decision of the year on 12 December, with market experts anticipating a series of cuts are on the way in 2025. 

One of the most anticipated events this year was the US Presidential election, held on 5 November. The Republican Party presidential candidate, Donald Trump, came out as the winner over the Democrat’s vice president Kamala Harris. He will be inaugurated as the nation’s 47th president on 20 January 2025. 

Before the election outcome, Powell had confirmed: “In the near-term, the election [outcome] will have no effects on our policy decisions. Many things affect the economy … and the economy is quite difficult to forecast looking out past the very near-term. We don’t know what the timing and substance of any policy changes will be.” 

The day after the election, US equity markets responded positively, with some stocks reaching record highs. Small company stocks, as well as the financial and energy sectors, also performed particularly well. 

Equity markets typically react well to the certainty of an election outcome, irrespective of which party is voted in. And while there could be some market reactions to the US election outcome – positive or negative – it highlights the importance of focusing on the long-term horizon rather than short-term noise. 

Market experts are keeping a close eye on China’s stimulus policy rollout, following the country’s announcement of measures in October. To date, markets have been disappointed the policy changes have lacked any large-scale stimulus, but according to academics the support policies are beginning to have a stabilising effect on the economy. However, the real impact will play out over the coming weeks and months as further policy measures are released. 

China policy makers are also watching with interest how easy or difficult it will be for returning President Trump to initiate and implement his policies, particularly around trade tariffs. It is too early to tell the potential effects of these protectionist measures. 

Australia will continue to sit in a “higher for longer” interest rate environment until the RBA sees a continued decrease in inflation that deems its board comfortable enough to start cutting rates. 

If you’re wondering about whether you should make changes to your investments, we recommend connecting with your financial adviser to review your investment goals, identify any potential opportunities, and make changes if necessary.  

If you don’t have an adviser, you can find an adviser near you using our Find an Adviser service. Call us with any general queries on 13 13 36, Monday to Friday, 8:30am - 6pm Sydney time (+61 2 9197 3050 from outside of Australia).