Bulls to boars

It’s been another bullish year so far for global equity markets. But as investors head into the final quarter of 2024 and the Federal Reserve’s rate-cutting cycle begins, a different kind of animal spirit is starting to stir.

Call it the “boar market.” These wild beasts can be unpredictable and rarely charge in a straight line forward. Instead, they stampede in short bursts and different directions as conditions change—much like the volatile moves that have characterized financial markets over the past two months as investor attention swung between rates, growth, and US election uncertainties.

Indeed, the third quarter saw global equities zigzag from record highs into corrections and back again. First-half outperformers, including tech-heavy North Asian markets, experienced outsized volatility, while laggards like ASEAN equities and currencies outperformed as US yields and the dollar fell. The Japanese yen, meanwhile, reclaimed all its year-to-date losses and is on track for its biggest quarterly advance against the USD since 2008.

We expect the “boar-ish” conditions to persist in 4Q. Slowing growth in the US and China and risks around the US election are likely to spur recurring bouts of volatility in the months ahead. Yet at the same time, our base case of further rate cuts, a soft landing for the US economy, and a weaker USD should still allow equities, bonds, and alternatives to deliver positive returns over the next 6-12 months while cash returns dwindle. What’s more, these tailwinds have historically been especially powerful for select markets and assets in Asia.

How then should investors position in such a boar market? To answer that, we examine the major market drivers and opportunities in the quarter ahead, plan for a seasonally volatile period in tech, and (re)address US election risks for Asia.

Written with Mark Haefele, our Chief Investment Officer.

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