2024 in review. How did global equities perform and what moved the markets?

How did the equity markets perform in 2024?

From political changes in France, Japan and the UK, to the impact of Trump’s re-election, there was a lot to digest in 2024.

Interest rates didn’t fall as much as expected and neither did inflation; geopolitical tensions have also intensified in Ukraine and the Middle East.

Europe

Europe has faced many struggles this year, with elections and weaker economic data creating further uncertainty.

In the UK Labour won a resounding victory in July which gave the markets confidence – albeit very briefly. The new government failed to act until October after much deliberation over a budget that they said would help ‘turbocharge (economic) growth to the fastest in the G-7’. To say they then disappointed could be considered the understatement of the year.

Having said they wouldn’t raise tax on employees, they instead raised taxes on the employer. The result could only lead to one thing – higher unemployment resulting in lower growth. It was a confusing decision to say the least.

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The UK got off to a strong start in 2024 and the FTSE 100 touched all-time highs. Economic growth matched the strongest in the G-7, however, since Labour took power, the economy has stagnated and GDP flatlined. This is problematic for the new government as their plans rely on an expanding economy to generate the extra funds for infrastructure projects and public services.

Almost one in four British businesses have predictably cut jobs amid widespread pessimism over the squeeze on their finances caused by Labour’s tax-raising budget. S&P Global’s purchasing managers’ index confirmed that the private sector stagnated at the end of 2024 with the weakest growth in 14 months.

The closely watched survey showed that firms shed jobs at the fastest pace in more than 15 years (excluding the pandemic) after Chancellor of the Exchequer Rachel Reeves hiked the payroll tax in her budget. Some 23% of employers said they’d reduced headcount.

Businesses had previously warned her that the £26 billion national insurance raid would lower wage growth, limit hiring and push up prices, and December’s PMI is the latest survey to show the effect on jobs. Confidence in the UK has slumped to its lowest level since the aftermath of former prime minister Liz Truss’s disastrous mini-budget, according to a recent poll published by the British Chambers of Commerce.

In France no party gained a clear majority and, while Michel Barnier was later appointed prime minister, his minority government has already collapsed after Barnier forced through a budget without a vote in parliament.

The budget included tax rises and spending cuts, but this received backlash from opposition parties, including both the far-right National Rally and far-left France Unbowed Party.

As a result, the French parliament voted Barnier out after a motion of no confidence was approved. President Emmanual Macron has since chosen Francois Bayrou, a fellow centrist and ally of Macron, as prime minister. This comes just three months into Barnier’s term – the shortest of any premier since France’s Fifth Republic was founded in 1958.

Looking forward the whole of Europe is also vulnerable to various potential policies from the Trump administration, particularly when it comes to trade. To put things into perspective, the US accounted for a fifth of the EU’s exports in 2024. Germany, Italy and Ireland are the countries with the highest exports to the US.

Trump has proposed a blanket 20% tariff on imports from the EU. This could increase costs for some businesses and could even see some European manufacturers move production to the US in an attempt to avoid tariffs.

Trump has also campaigned to end Russia’s invasion of Ukraine and pull back on military aid. Ukraine relies heavily on the US military, and any withdrawal of this support could increase pressure on Europe to provide aid. Finding more cash to fund this is possible, but not necessarily easy or palatable.

NATO allies are also under pressure to spend more on defence. This would place greater responsibility on Europe’s shoulders and significantly increase how much it needs to spend on security and defence.

On the back of this, European markets have delivered mixed performances.

Source: uk.investing.com/historical data

The German DAX is the outlier having had a great year reaching all-time highs serval times. The explanation for this is not a simple one as the year provided political instability and mostly negative economic indicators.

Technology, financials and industrials all performed well. The Index is heavily weighted towards SAP, Europe’s largest technology company which now accounts for approximately 15% of the DAX 40. Siemens Energy and Rheinmetall AG also performed very well as did Deutsche Bank.

That said, German manufacturing activity has been in contraction for the last 2 years and GDP over the last 12 months was actually negative at -0.3% one of the lowest in Europe. Assuming Q4 comes in flat, this will lower that figure even more with a year-over-year GDP reading of -0.8%.

A rise in the German stock market makes little sense on the surface, but this can often be the way. Markets aren’t always rational and with the French CAC 40 in decline, one explanation is that funds needed to find another home for their capital and the DAX is the next largest European market. It’s a simple explanation, but probably the most likely too.

The US.

Donald Trump was elected as President for a second time. US equities reacted positively to this news initially but came under pressure towards the end of the year as cautious comments from the US Federal Reserve dampened interest rate cut expectations for 2025. Despite the yearend mini-correction, 2024 was another excellent year for US investors.

Markets were supported by interest rate cuts across most of the developed world as inflation rates fell back towards central bank target levels. As mentioned, cuts weren’t quite as quick as originally anticipated, but they did come.

Wall Street’s best and brightest were miles off the mark with the average target for the S&P 500 in 2024 at 4,861, a gain of just 2% (source: Bloomberg/Creative Planning).

The highest prediction was Yardeni research which forecast a gain to 5,400. The lowest was JP Morgan who have a lot of egg on their face from this one. Their forecast was for the S&P 500 to drop around 12% in 2024 to 4,200.

JP Morgan is the largest investment bank in the world and their US equity market prediction was that stocks would tumble. Stock market predictions are nearly impossible to make, and if they can get it wrong with thousands of analysts being paid millions of dollars, then what hope does anyone have?

Here is where US markets actually ended up:

Source: uk.investing.com/historical data

Asia/Pacific

Asia-Pacific stocks had a good run in 2024, with most major markets ending the year in positive territory, as the region’s central banks eased monetary policy while an AI boom lifted tech stocks.

Taiwan’s Taiex led gains due to their chip manufacturing while Hong Kong’s Hang Seng Index came in second.

Asia successfully reduced inflation faster than the rest of the world, said Mike Shiao, chief investment officer for Asia ex-Japan at investment management firm Invesco, paving the way for monetary easing.

Chinese activity remained weak as the country grappled with falling property prices and weak consumer confidence. Investors were initially unimpressed with the policy response. However, September’s more cohesive policy announcements appeared to convince markets that 2025 would finally see the significant stimulus required to restart the economy and Chinese equities rallied in the second half of the year

TPP

Like the markets, TPP had a mixed year but was predominantly positive. Due to the returns of certain indices, it was easier to make money in some areas more than others. Our CAC strategies were always going to find the going tough as the benchmark posted negative returns.

However, as is the job of our traders, both our CAC strategies did manage to outperform their benchmark, even if it was only by a little. The CAC Long/Flat strategy was positive by 0.1% compared to a negative return on the French benchmark and the CAC Tech Entry strategy managed a positive return of 15.6% - which was a fantastic performance.

This strategy is another long or flat that aims to get in at low entry levels and then exit the market after a strong move up. This worked very well in 2024 as volatility reigned over growth.

Our two FTSE long/flats also had good years in relation to their benchmarks. With the FTSE 100 eking out a small gain of a little over 5%, Cambridge Futures posted another 8.9% for the year. The newer Tech Entry trading strategy actually managed to notch up one of the best performances of the year on TPP with a return of 25.5% - that’s 5x the return of its benchmark.

The other great performances of the year were of course the trackers. When some indices are recording strong returns, our trackers will always do likewise. The S&P 500 returned 23.32%, our S&P 500 hedged tracker returned 29.8%. This is how it works at TPP. Not only does our tracker heighten market moves, but it also has a hedge to the downside to limit the losses in case of a ‘black swan event’ (an extremely negative event or occurrence that is nearly impossible to predict). For more information, please do contact us.

The DAX 40 tracker also made heightened returns of 27.6% after a little extra leverage was taken after a drop in the market.

Other than our index trackers, our stock picking strategies also performed well with our Bankers Fund returning 18.1% and the Buffett Tracker adding 17.2%.

There is no doubt that it was a good year for many strategies and if you have the right composition of long only, long/flat and active trading picks in your portfolio then you will have done well. We’re always building a better model and using our own expertise and experience of the market to create better, more profitable portfolios for clients.

Here are the top ten from 2024.

The Future

“Prediction is very difficult, especially if it's about the future!” - Niels Bohr.

One thing we know about investing is that nothing is certain. Equity markets are famously hard to predict and if you try to look at them on a weekly, or even monthly basis, then you can end up getting it very wrong.

Paul Hickey, a founder of Bespoke Investment Group, compared the yearly Wall Street predictions and actual market results starting with the forecast for Dec. 31, 2000. He found that the Wall Street consensus only ever predicted gains, every single year - of about 8.8 per cent on average. However, the S&P 500 declined in seven of the 25 calendar years in Mr. Hickey’s tally.

Yet in that period, the Wall Street consensus never predicted an annual stock market decline.

After failing to anticipate the soaring stock market of 2023 and 2024, the strategists are more optimistic than usual now, predicting a price gain of 9.6 per cent for the next calendar year. That number doesn’t include dividends, which would lift the total return of the S&P 500 above 11 percent.

Yet we see plenty of reasons why this might not come to pass.

The Federal Reserve this week trimmed interest rates again, by one-quarter point, but it might slow down now. The economy has been strong, and some of the incoming Trump administration’s policies — like its intention to cut taxes and to lighten the regulatory burden for many companies — are likely to bolster the market.

Others, like much higher tariffs on a variety of countries, and mass deportations along with immigration restrictions, are far less popular among corporations and investors and could disrupt the global economy. So could political issues like the conflict over funding the budget; the debt ceiling seems to be a regular debate in Washington as borrowing continues to rise across the world.

There are still wars in Ukraine and the Middle East. Will Donald Trump help put out the fires or will he inadvertently stoke them? We cannot know.

The only thing we do know, is that the longer an investment is held, the better the average outcome. The S&P 500 has been a profitable investment over every rolling 20-year period since 1928. That means owning an S&P 500 tracker for at least two decades has always been a profitable investment strategy – in fact one of the most profitable of all asset classes.

While we always aim to beat global benchmarks, we also believe that time in the market is key. Compound returns and reinvest – a motto to invest by.

Here’s to a good year in the markets. Happy 2025.

"How many millionaires do you know who have become wealthy by investing in savings accounts? I rest my case." - Robert G. Allen

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