The final month of 2024 offered a mixed bag for global markets, capping off a year that was largely favourable for risk assets but ended on a more cautious note. December’s economic pulse reflected a challenging environment, as markets navigated the implications of a shifting policy landscape, persistent geopolitical tensions, and regional economic divergences. Performance across asset classes was mixed, with equities delivering modest gains in some regions but generally underwhelming results overall. Alternatives and bonds faced broad declines, while currency movements highlighted the strength of the dollar against its major counterparts.
The U.S. equity market continued to shine, posting a 10.7% return over the fourth quarter and cementing its position as the top-performing region for the year. December’s performance was bolstered by strong GDP growth and investor confidence in the continuation of Trump’s 2.0 economic agenda. Policies centred on tax cuts and deregulation have invigorated various sectors, with financials and small-cap stocks starting to join the growth alongside the “Magnificent Seven” mega-cap tech giants that dominated earlier the year.
The strengthening U.S. dollar added an additional tailwind for sterling-based investors, appreciating by 6.6% against the pound during the quarter. This currency dynamic amplified returns and underscored the relative strength of the U.S. economy compared to other developed markets.
In stark contrast, Europe ended the quarter as the worst-performing region, with equities declining by 4.4%. The continent’s manufacturing sector faced significant headwinds, including rising costs, weak export demand, and intensifying competition from China. Political instability in key economies such as France and Germany further weighed on sentiment, exacerbating the poor performance of European equities.
UK equities posted a marginal decline of 0.7% for the quarter but managed a respectable near10% gain for the year. December’s performance was subdued as the UK autumn budget introduced higher than expected tax hikes, dampening investor enthusiasm. However, attractive valuations and robust merger and acquisition activity provided a silver lining, hinting at potential upside in the medium term. The first positive net inflows into UK equities in years, observed in November, suggest a gradual shift in investor sentiment toward the region.
Asian and emerging markets closed the year on a weak note, with equities declining in quarter four. Persistent macroeconomic challenges in China—including soft economic data, falling property prices, and concerns over debt sustainability—cast a shadow over the region. Emerging markets also struggled with the ripple effects of U.S.-China trade tensions and a stronger dollar, which discouraged capital flows into these economies. Japanese equities were a notable exception, delivering modest gains for the quarter. The ongoing benefits of corporate reforms and optimism about the end of deflation supported the market, offering a glimmer of hope in an otherwise challenging environment for the region.
Throughout most of 2024, declining inflation enabled central banks to cut interest rates, providing a supportive backdrop for fixed-income assets. However, December saw cracks in this narrative as concerns emerged about the inflationary potential of Trump’s fiscal policies, particularly the reintroduction of tariffs. This shift in sentiment led to weakness across interest rate-sensitive assets, including bonds, infrastructure, and real estate.
Gold, a perennial safe haven, rebounded strongly with a 5.9% gain for the quarter, reaching all-time highs in October before stabilising. The metal’s performance was underpinned by geopolitical uncertainty and continued central bank purchases. In contrast, other commodities faced headwinds as slowing global growth tempered demand.
As 2024 drew to a close, markets exhibited a cautious optimism tempered by emerging risks. The U.S. continued to lead the global recovery, buoyed by robust economic growth and market-friendly policies. However, the divergence in regional performance highlighted the fragility of the global economy, with Europe and emerging markets lagging behind. Looking ahead, the interplay between fiscal stimulus, monetary policy, and geopolitical developments will shape the narrative for 2025. While December may not have ended the year with fireworks, it provided a fitting conclusion to a complex and dynamic year for global markets.
21st January 2025
Cappuccino Commentary
A relaxed read on the issues of the day
The final month of 2024 offered a mixed bag for global markets, capping off a year that was largely favourable for risk assets but ended on a more cautious note. December’s economic pulse reflected a challenging environment, as markets navigated the implications of a shifting policy landscape, persistent geopolitical tensions, and regional economic divergences. Performance across asset classes was mixed, with equities delivering modest gains in some regions but generally underwhelming results overall. Alternatives and bonds faced broad declines, while currency movements highlighted the strength of the dollar against its major counterparts.
The U.S. equity market continued to shine, posting a 10.7% return over the fourth quarter and cementing its position as the top-performing region for the year. December’s performance was bolstered by strong GDP growth and investor confidence in the continuation of Trump’s 2.0 economic agenda. Policies centred on tax cuts and deregulation have invigorated various sectors, with financials and small-cap stocks starting to join the growth alongside the “Magnificent Seven” mega-cap tech giants that dominated earlier the year.
The strengthening U.S. dollar added an additional tailwind for sterling-based investors, appreciating by 6.6% against the pound during the quarter. This currency dynamic amplified returns and underscored the relative strength of the U.S. economy compared to other developed markets.
In stark contrast, Europe ended the quarter as the worst-performing region, with equities declining by 4.4%. The continent’s manufacturing sector faced significant headwinds, including rising costs, weak export demand, and intensifying competition from China. Political instability in key economies such as France and Germany further weighed on sentiment, exacerbating the poor performance of European equities.
UK equities posted a marginal decline of 0.7% for the quarter but managed a respectable near10% gain for the year. December’s performance was subdued as the UK autumn budget introduced higher than expected tax hikes, dampening investor enthusiasm. However, attractive valuations and robust merger and acquisition activity provided a silver lining, hinting at potential upside in the medium term. The first positive net inflows into UK equities in years, observed in November, suggest a gradual shift in investor sentiment toward the region.
Asian and emerging markets closed the year on a weak note, with equities declining in quarter four. Persistent macroeconomic challenges in China—including soft economic data, falling property prices, and concerns over debt sustainability—cast a shadow over the region. Emerging markets also struggled with the ripple effects of U.S.-China trade tensions and a stronger dollar, which discouraged capital flows into these economies. Japanese equities were a notable exception, delivering modest gains for the quarter. The ongoing benefits of corporate reforms and optimism about the end of deflation supported the market, offering a glimmer of hope in an otherwise challenging environment for the region.
Throughout most of 2024, declining inflation enabled central banks to cut interest rates, providing a supportive backdrop for fixed-income assets. However, December saw cracks in this narrative as concerns emerged about the inflationary potential of Trump’s fiscal policies, particularly the reintroduction of tariffs. This shift in sentiment led to weakness across interest rate-sensitive assets, including bonds, infrastructure, and real estate.
Gold, a perennial safe haven, rebounded strongly with a 5.9% gain for the quarter, reaching all-time highs in October before stabilising. The metal’s performance was underpinned by geopolitical uncertainty and continued central bank purchases. In contrast, other commodities faced headwinds as slowing global growth tempered demand.
As 2024 drew to a close, markets exhibited a cautious optimism tempered by emerging risks. The U.S. continued to lead the global recovery, buoyed by robust economic growth and market-friendly policies. However, the divergence in regional performance highlighted the fragility of the global economy, with Europe and emerging markets lagging behind. Looking ahead, the interplay between fiscal stimulus, monetary policy, and geopolitical developments will shape the narrative for 2025. While December may not have ended the year with fireworks, it provided a fitting conclusion to a complex and dynamic year for global markets.
This information is intended for professional financial advisers only. Copia does not provide financial advice. This information is not intended as financial advice and should not be interpreted as such.