Latest investment update

It was a bumpy start to the month but markets soon recovered, and conditions still look good for stock markets despite slowing economic growth.

Markets have moved back up to where they were before investor worries about US jobs numbers caused uncertainty a month ago.

The recovery comes after markets realised signs of the all-important US economy slowing down weren’t as worrying as first thought.

There is also some investor excitement around a potentially return-supporting interest rate cut coming soon in America – the first there in four years.

Experts at Coutts bank who manage the funds behind NatWest Invest feel current conditions continue to support stock markets.

Joe Aylott, Investment Strategist at Coutts, said: “The US economy is slowing down but it’s still growing, and companies are performing well, as shown by a recent run of positive financial results announcements.

“We expect some occasional market fluctuations between now and the end of the year, after a remarkably strong first six months, as the economy slows and markets digest US election uncertainty. But overall conditions remain solid for investors.”

Inflation – a key worry for investors for a long time – has now settled down and interest rates are being cut around the world as a result. This could be good for investors as lower rates encourage people to borrow and spend, which can boost company profits and support share prices.

The UK’s Bank of England and the European Central Bank have already cut rates, as have other central banks around the world. But crucially, the US, which influences markets worldwide, looks almost certain to do the same soon. The head of America’s interest-rate setting central bank the US Federal Reserve, Jerome Powell, recently gave his strongest hint yet that US rates would drop this month.

Meanwhile, we recently had ‘earnings season’ – a period of financial results announcements from companies around the world. For the most part, it showed companies doing well, with the majority of businesses announcing numbers above market expectations – more good news for investors.

Looking ahead, analysts expect third-quarter US earnings to continue to grow year-on-year, with trends broadening across the market. And while European earnings growth is expected to be modest in 2024, it's predicted to improve significantly in the coming years.

The Coutts’ team still feels positive about investing in stocks over bonds given the current climate. They therefore hold more stocks than their benchmark. But with some more uncertainty expected this year as the economy slows, they’re keeping their investments well-diversified with US government bonds.

Generally, if stocks fall for economic reasons, bonds tend to rise, so this positioning should help during any market fluctuations.

Other relatively recent developments include moving their investments out of high yield bonds and into global credit to reflect changing market conditions.

Here you’ll find our previous investment market updates.