December 2024 Market Update

Overview

Last year proved a fruitful one for investors. The charge higher in equities produced back-to-back years of strong returns and saw UK investors in global stocks ending 2024 up more than 20%. The introduction of interest rate cuts in most major economies boosted growth and investor confidence, while inflation dropped back to more reasonable territory.

Once again the US market led the way, rising 23.3%, as fears at the start of the year around a rate-driven recession eased, with growth slowing but remaining positive over the year. Large tech stocks once again produced strong returns, with the AI theme gaining considerable attention. Focus in the latter half of the year shifted to the path of interest rate cuts as inflation came under control, however the 10-year treasury yield rose 0.71% over the period as the strong economy lifted expectations of the so-called neutral rate.

Japanese stocks were in the spotlight again with the Nikkei 225 benchmark index breaking out from its all-time high last set in 1990, with inflation and wage hikes appearing to finally settle into positive territory after years of deflation. They rounded out the year as the top performing market in December, rising 3.9%, and the second best overall.

UK stocks rose over the year but had a more mixed picture, producing a 5.6% return to investors, with the economy growing but at a slow pace. Despite interest rate cuts, the longer term 10yr Gilt yield rose 1.03%, with inflation proving stickier than other economies despite the lacklustre growth. European and Emerging Markets had similar outcomes, with stock markets rising but perhaps lacking large tech stocks to drive returns.

Politics played a significant part of the backdrop to 2024, with the US, UK, Japan and France all seeing major elections and new leaders (and with Germany and Canada set to follow in 2025). Italy looks set to be the only country in the G7 with a relatively stable backdrop, while President Macron in France faces a tough task to keep together a broad coalition in parliament.

Full update below…