The market exuberance continued in September. Global equity indices continued to hit all-time highs and delivered another positive month. The global index MSCI All-Country World Equity rallied 2,4% in September (in USD) – the index has had positive returns in seven out of the last eight quarters and is now up 54% for this period. Stocks were lifted mainly by the fact that multiple central banks across the globe embarked on a rate-cutting cycle. Investors felt encouraged by the Federal Reserve’s bold move to lower interest rates by 50 basis points in September, a step that generally exceeded market expectations. The Fed’s decision was supported by somewhat positive economic data: inflation continued its downward trajectory (CPI, the Consumer Price Index), trended lower; unemployment seemed to stabilize, and payroll data remained strong. Furthermore, the completed Q2 reporting season showed American companies reporting annual earnings growth of 11%, which is the best figure for the last 10 quarters. On the contrary, European shares did not have a good September and closed the month with a loss in local terms. Across much of the continent growth has stagnated, affecting some of its largest economies like Germany, France, and the United Kingdom. Although inflation seems largely under control in Europe, debt and unemployment levels remain at relatively high levels, dragging down investor sentiment. The Chinese stockmarkets shot up in September in response to the recent aggressive fiscal and monetary stimulus packages, designed to lift economic growth to the government’s 5.0% target. Equity indices chalked up huge daily gains: the benchmark CSI 300 rose by 25% over five days, its most ever for such a period; The Shanghai Composite went up by 21% over five days, its largest gain for almost 30 years. Japan’s shares dropped for the month, as the Bank of Japan’s tightening course remains an exception among other central banks – the interest rate rises actually benefited the yen, which appreciated over 10% against the US dollar, while the equity market fell 6% over the quarter (in local terms). Elsewhere, as global interest rates dropped, gold prices surged in Septermber, reaching all-time highs for a second month in a raw. Oil prices fell as traders weighed the likelihood of slowing global demand for oil against possible short-term disruption to supply due to the escalating Middle East conflict. This pushed down Energy stocks, which, along with Healthcare stocks, were among the worst performers; while a reversal for cyclical stocks meant that Consumer discretionary and Materials lead the market. Bond markets also did well in September, propelled by the prospects of lower rates, moderating inflation and weakening economic growth. In reflection of the investors’ risk-on mood, lower-quality bonds (which are more economically sensitive) slightly outperformed investment grade bonds. Over the whole third quarter, the Barclays Global Aggregate bond index returned a solid 7.0%.
          Shares in the US continued their march higher in September, and over the quarter. The S&P500 returned 5,9% for the third quarter, and more than 2% in September, which was its tenth positive months of the past eleven. Encouragingly, the equity rally finally broadened across sectors, and some previous winners fell behind. All sectors aside from Energy posted positive returns for the quarter – top performing sectors included Utilities and Real estate, while Information technology lagged. Small cap stocks also had a particularly strong rally, in anticipation of lower interest rates ahead. Indeed, the big news of the month was that the Fed joined other central banks in the rate-cutting cycle by reducing the federal funds rate by a whole 50 basis points (bps, equivalent to 0,5%). The size is unusually big for a first step, and it seems to have been prompted by fears that the Fed may be too late with the cut and so risked damaging the economy. The jobs report for August was weak, showing that fewer than expected jobs were added in the non-farm sector, and although unemployment fell sightly to 4,2% from the previous month, it has crept up from a low of 3.7% at the beginning of the year. Inflation, on the other hand, continued to subside, falling below 3% for a first time in more than three years. Investors were also reassured by some resilient corporate earnings, which helped to sooth the market’s worries. Now the attention is turning to the forthcoming US presidential elections on 5 November. Although the two candidates stand for some drastically opposing view (ex. on immigration, taxes, tariffs…), as of the current moment the chances of both look pretty even, with no clear indication of whether Mr. Trump or Ms. Harris is going to win. On the fixed income market, US Treasury yields fell considerably over the quarter (bond yields and bond prices move in opposite directions) given the strong beginning of the rate cutting cycle. Leader was the 2-year US Treasury note, whose yield fell 111 bps over the quarter, while the yield curve steepened (an inverted yield curve slope is considered an indication of upcoming recession).  Among corporate credit, US investment grade bonds outperformed the lower quality, high-yield bonds.  
            Although European shares did not shine in September, they had a good quarter. The broad pan-European equity index Stoxx600 retreated -0.4% for the month, but added more than 2,2% for the third quarter of 2024. Similarly to the US, the most advances were recorded by the Real estate, Utilities and Healthcare sectors, as the prospect of lower interest rates made investors re-evaluate some previously out-of-favour industries. Energy and Information technology were the main laggards, delivering losses for the quarter. In September the European Central Bank (ECB) made its second interest rate cut by 25 bps, as expected, taking interest rates to 3,5%. Price data showed improvement, with annual inflation dropping sharply to 1.8% in September (from 2.2% in August). This is the first time in the last three years when inflation has fallen below the ECB’s 2% target. However, other indicators pointed to a slowdown in the Eurozone economy. The manufacturing purchasing managers’ index (PMI) for September came in at an eight-month low of 45,0 (a reading below 50 indicates contraction), revealing a deepening slump in manufacturing. The service sector PMI is still in expansionary territory at 50,5, but it also contracted sharply from 52,9 in August (when the Olympic games in Paris were held). The combination of weaker PMI data and lower inflation readings significantly strengthens expectations of further rate cuts from the ECB. In the UK, the Bank of England (BoE) also made its first cut in four years, after data showed that the annual CPI inflation fell to the BoE’s 2.0% target in the summer – UK equities rose over the quarter on the hopes for a sustained recovery in the domestic economy. UK gilts (sovereign bonds) rallied over the quarter fueled by government promise to spur economic growth. German and French 10-year government bond yields declined (meaning their prices rose) but underperformed compared to Italy and Spain, which were the strongest performers in Europe over the quarter.
             September was another month in which the shares on the Bulgarian Stock Exchange performed unconvincingly. For the second consecutive month, the best performing stock index was the real estate one, BG REIT, which was up 4% on the back of a global property upturn, among falling interest rates. This month again, the best performing company on our stock exchange was Bulgaria Real Estate Fund REIT, which recorded a gain of nearly 17% for September.  The small cap index, beam, and the flagship SOFIX ended the month with small losses. The broad index was impacted by the decline of one of its heaviest constituents, the commercial bank First Investment Bank AD, which sank more than 18% and recorded the worst result for the month among domestic companies.  Also in September, Bianor Holding AD started trading on the BSE's renowned Premium segment – the technology company's shares were previously traded on the Standard segment. Another capital increase is on the way for the company, after several acquisitions of IT companies during the past year. Source:Bloomberg