Market review

Q4 in review

Robust US economic data and higher inflation made for a volatile end to the year in bond markets, pushing up yields and strengthening the US dollar. A more hawkish tone from the Federal Reserve further dented optimism around the path of interest rate cuts, resulting in a more subdued end to an otherwise strong year for equity markets.

9 Jan 2025

14 minutes

Chapters

01
Global equities
02
US
03
South Africa
04
China
05
Emerging markets
06
Europe and UK
07
Global fixed income
08
Global credit
09
EM fixed income
10
Commodities
01

Global equities

Shipping containers
Fed hawkishness offsets Trump rally; tariff threat hurts China.

Global equities ended the final quarter in negative territory, driven by a sharp December sell-off following the Federal Reserve's cautious outlook on interest rate cuts for 2025. The central bank projected only two rate cuts for the year, down from the four previously anticipated. This dampened the positivity seen in the previous month, when Donald Trump’s decisive victory drove global equities higher. The November rally, led by Trump’s home market, reflected investors’ view that some of the new administration’s policies, such as corporate tax cuts and lighter regulation, could boost domestic growth.

There was significant divergence among geographies, with US equities rising to another all-time high in November before trailing off in the final month of the year, albeit still up for the quarter. Japanese equities were another positive, supported by a weaker yen. However, there were pockets of weakness in other markets at risk of proposed US tariffs, including China and Mexico, which fell over the quarter, as did European car manufacturers. France was a notable laggard after the government of Michel Barnier fell following the first successful no-confidence vote since 1962 after his proposed budget failed to pass.

Geopolitics was in focus too, with Ukraine launching US long-range missiles into Russia, which responded by loosening the terms of use for its nuclear doctrine. In the Middle East, a ceasefire agreement was reached between Israel and Hezbollah. At the sector level, consumer discretionary, communication services and tech all performed strongly, however materials lagged, as did healthcare stocks, which were hit by the nomination of vaccine sceptic Robert Kennedy Jr to head the US health department. The interest-rate-sensitive real estate sector also struggled amid concerns about tighter monetary policy.

Indices (total return in local currency)
S&P 500 2.3%
Nasdaq Composite 6.3%
MSCI ACWI -1.0%
Nikkei 225 5.3%
EuroStoxx 600 -2.9%
FTSE 100 -0.2%
Hang Seng Index -1.1%
SSE Composite 0.7%

Source: Bloomberg as at 31 December 2024.

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