Quarterly Investment Review for Insurers: Q2-2024

Strength in some Asian markets helped emerging market equities outperform developed markets in Q2. Stocks related to the artificial intelligence (AI) theme continued to perform strongly. The European Central Bank cut interest rates but sticky inflation kept other major central banks on hold. Although still negative YTD, strong U.S. aggregate bond market returns in June push returns slightly into positive territory for Q2.

US shares gained in Q2, led higher by the information technology and communication services sectors. Ongoing enthusiasm around AI continued to boost related companies amid some strong earnings and outlook statements. Weaker sectors included materials and industrials. Among financials, numerous US banks announced plans to increase dividends after passing annual stress tests from the Federal Reserve (Fed).

Although no rate cuts were made in the first half of the year, the Fed slowed quantitative tightening, reducing the monthly Treasury maturities from $60bn to $25bn while maintaining the mortgage-backed securities cap at $35bn. This should result in the Fed holding larger Treasury amounts than pre-pandemic levels, aiding in keeping long-term interest rates down.