The year 2024 proved to be a positive year for most financial markets, marked by a mix of optimism, volatility, and significant challenges. As the global economy navigated a complex interplay of macroeconomic factors, investors and policymakers were kept on their toes. Below is a brief review of the key developments that shaped the financial markets in 2024.

Global Economy: Resilience Amid Uncertainty

Towards the start of 2024, the global economy was poised for moderate growth, with the International Monetary Fund (IMF) projecting a global GDP increase of 3.1%1. US GDP was predicted to rise 2.1% with the Eurozone facing a more subdued expected expansion of 0.9%, hindered by energy supply challenges and slower industrial activity. Despite initial optimism, the year unfolded with a series of challenges, including persistent inflationary pressures, geopolitical tensions, and the ongoing transition to greener energy. Most economists now expect GDP growth for 2024 to be 2.7% in the US and 0.8% in the Eurozone.

Central banks, particularly the U.S. Federal Reserve, played a pivotal role in stabilizing markets. After a series of aggressive rate hikes in previous years, the Fed adopted a more measured approach, pausing rate increases mid-year to assess the cumulative impact on economic growth. A series of rate cuts followed which buoyed equity markets, but the persistent ‘higher-for-longer’ stance kept bond yields elevated. The US 10-year government bond yield started the year at 3.9% and at the time of writing is at 4.6%.2

US corporate bonds returned 2.3%, European corporate bonds returned 4.7%, treasuries returned 0.7%.3

Equity Markets

Global equity markets had a strong year in 2024, with the S&P 500 rallying 23.8%, the Nasdaq up 26% and the FTSE all world up 16%. Europe and the United Kingdom fared worse, with markets up 5.6% (as depicted by the STOXX Europe 600 index) and 5.2% (as depicted by the FTSE 100 index), respectively.

However, concerns over a potential economic slowdown in China, coupled with escalating geopolitical tensions in Ukraine, weighed on investor sentiment which led to a weaker performance in emerging market equities than developed markets as evidently shown in the MSCI Emerging Markets Index ended the year up 5.3%.

Key sectors:

  • Technology: The AI boom continued to dominate headlines, with significant investments in generative AI and semiconductor technologies. Mega-cap tech stocks like Apple and NVIDIA led gains, though valuations remained a topic of debate.
  • Energy: The energy sector lagged the rest of the US market and came in as one of the worst sectors on a year-to-date basis. Oil prices are poised to end the year marginally higher at almost $72 per barrel.
  • Healthcare: While traditionally a defensive sector, healthcare faced headwinds due to regulatory uncertainties and slower innovation pipelines. Healthcare ended the year up only 0.67%; a significant underperformance compared to the broader market.

Fixed Income

The bond market in 2024 faced significant challenges with persistently high yields. The 10-year U.S. Treasury yield hovered around 4.5%, reflecting concerns over inflation and fiscal deficits. Treasury yields experienced volatility throughout the year, driven by strong U.S. economic data but tempered by labour market concerns in the latter half. Despite the Federal Reserve cutting rates by 50bps and 25bps in successive meetings since September, yields rose, and the yield curve steepened, highlighting a divergence between market and Fed expectations.

Market sentiment shifted after a Republican electoral sweep fuelled optimism about economic growth but raised inflation concerns. The Fed tamed these expectations, signalling that future rate cuts may be slower. In Europe, the ECB began its easing program amid economic uncertainty, with Germany’s weak performance and political issues in France weighing on the outlook.

Commodities: A Mixed Bag

Commodities experienced a divergent year, shaped by varying supply-demand dynamics:

  • Oil: Brent crude prices averaged $73 per barrel. Concerns in the Middle East and the hopeful resurgence of Chinese factory activity failed to push oil prices higher.
  • Gold: The precious metal served its traditional role as a safe haven, with prices breaching $2,600 per ounce propelled by the Chinese Central Bank and heightened economic and geopolitical uncertainty.

Cryptocurrency: The Rebound Continues

After a tumultuous 2023, cryptocurrencies saw a resurgence in 2024. Bitcoin and Ethereum posted gains of 115% and 45% respectively, buoyed by institutional adoption and regulatory clarity. The election also led to increased speculative buying as traders hoped that a Trump administration would be more favourable towards digital assets. However, volatility persisted, with market swings tied to speculative trading and macroeconomic developments.

Geopolitics and Market Impact

Geopolitical events played a significant role in shaping market sentiment. The conflict in Ukraine intensified, leading to disruptions in energy markets and increased defence spending globally. Meanwhile, US-China relations remained strained.

The year 2024 was notable for elections as over 60 countries went to the polls. It proved to be a challenging time for incumbents and traditional political parties. Faced with rising costs, cultural divisions, and dissatisfaction with the political status quo, voters in many nations expressed their frustration through the ballot box.

Few topics generated as much interest in 2024 as the US Elections. Donald Trump won a second term in office, with a large majority, which will likely have significant impacts on markets in 2025.

Looking Ahead

As we step into 2025, markets are poised to face new challenges and opportunities. While uncertainties persist, the resilience demonstrated by economies and businesses in 2024 provides a foundation for cautious optimism. Whilst the probability of a recession in the US in 2025 is low and the economic picture remains supportive for risky assets, equity valuations remain very expensive by historical standards, especially in the US. To navigate what is likely to be a volatile year, investors would do well to stay informed, diversified and agile.

Written by

Michael Tabone, CFA

Senior Portfolio Manager, ReAPS Asset Management Ltd

  1. IMF January 2024 World Economic Outlook Update ↩︎
  2. Bloomberg ↩︎
  3. US Corporate bonds returns based on the Bloomberg US Corporate Bond Index (IG). European Corporate bonds return based on the Bloomberg Euro-Aggregate Corporate Bond Index. Treasury bonds return based on the Bloomberg US Treasury Index. ↩︎

The information contained in this article represents the opinion of the contributor and is solely provided for information purposes. It is not to be interpreted as investment advice, or to be used or considered as an offer, or a solicitation to sell / buy or subscribe for any financial instruments nor to constitute any advice or recommendation with respect to such financial instruments. This article was issued by ReAPS Asset Management Limited, a subsidiary of APS Bank plc. ReAPS Asset Management Limited (C77747) with registered address at APS Centre, Tower Street, Birkirkara BKR 4012 is regulated by the Malta Financial Services Authority as a UCITS Management Company and to carry out Investment Services activities under the Investment Services Act 1994 and is registered as an Investment Manager under the Retirement Pensions Act.