2024 Global Market Insights from the Holden & Partners Investment Team
With 2024 in the rear-view mirror, our in-house investment team reflects on a year of market volatility, economic shifts, and political developments, providing insights into key regional trends, asset performance, and the outlook for 2025.
UK:
The FTSE 100 ended 2024 slightly down in Q4 amid economic uncertainty, tax changes, and weak IPO activity.
US:
The S&P 500 led global markets, driven by tech stocks and the prospect of Trump’s pro-business policies, while bond markets struggled.
Europe:
Political turmoil and economic weakness hit markets, with Germany facing recession risks and France’s instability unsettling investors.
Asia & Emerging Markets:
Japan’s reforms and weaker yen boosted stocks, while China’s property crisis and India’s growth shaped regional performance.
Alternatives:
Commodities had a mixed year, with gold outperforming, while property gains were tempered by shifting rate expectations.
Sustainability:
Sustainable investing faced headwinds from political shifts and regulatory changes, with climate concerns remaining in focus.
Performance:
Portfolios had a strong year, though sustainable investments lagged slightly, with asset allocation adjustments ahead for 2025.
UK
Q4 saw the FTSE 100 have its first negative quarter in six, albeit marginally, returning -0.18%.1 This came despite a late rally at the end of December. October was marred by uncertainty in the lead-up to Labour’s much-anticipated budget, and the tax hikes announced did little to improve investor confidence in British companies, with concerns over the effects of increased employer NI contributions in particular.2
November saw stronger performance, buoyed by the first Bank of England rate cut since August 3 and a weaker pound.4 The positive momentum failed to carry over into December, as doubt was cast over future rate cuts due to enduringly hot wage growth.5 Unexpectedly stalled economic growth further dampened sentiment heading into the festive period.6
This ultimately led to the FTSE 100 closing out 2024 with a return of 9.66%, though this growth was largely confined to the first 5 months of the year. Since reaching a then all-time high in mid-May, the index has returned -0.95% – running every which way in the interim without ever leaving the starting block.7 This statistic epitomises the uncertainty that has gripped markets and the country during the period, from elections, to budgets, to economic data and monetary policy. The effects of this sentiment can also be seen in the bond market, where 10-year gilt yields reached their highest level for 14 months as the year neared its end,8 caused by uncertainty over the future of the cutting cycle due to persistently sticky inflation data.9 This conclusion served as a microcosm of what has been a tough year for bond markets – particularly sovereign and investment-grade – due to overambitious rate cut expectations and disappointing inflation data.10
One ongoing concern for UK markets is the relentless decline of IPOs in the capital. Fundraising in 2024 fell 98% below its 2006 peak to $1bn, representing a third straight year of decline. Poor valuations, risk-averse investors and the rise of fledgling financial centres have left the UK languishing 20th in the global rankings by fundraising volume in the past year.11 Add into the mix still-accelerating mergers and acquisitions, and the UK small and mid-cap universes are looking ever smaller.12 Local investors will be hoping for regulatory intervention to spur listings and boost valuations if the UK is to maintain its reputation as a global financial powerhouse.
US
The S&P 500 led global stock market returns over 2024, bagging GBP investors a 27.26% return on investment following an additional 9.68% growth in Q413 (25.02% and 2.41% in local currency14). The re-election of Donald Trump fuelled a rally in November, as investor optimism increased on his business-friendly campaign promises. These included proposed extensions of tax cuts introduced with the ‘2017 Tax Cuts and Jobs Act’ and fresh cuts to some corporate and personal rates. There were also proposals for deregulation in certain sectors, with pharmaceuticals being one example.15 These are policies which are expected to be beneficial to US companies’ future earnings and the market reaction reflected this.
Blockbuster returns over the past year have largely been enjoyed thanks to the performance of the ‘Magnificent 7’ tech stocks, which now hold a near -40% weighting within the S&P 500 index.16 Such was their influence that the seven companies (Nvidia, Tesla, Alphabet, Meta, Amazon, Apple, Microsoft) were responsible for more than half of the index’s total gain in the past year, as they continued to reap the rewards of the recent AI boom, demonstrating rapid earnings growth.17 The soft-landing* of the US economy and continued resilience demonstrated by strong macroeconomic data also proved a boon to investor confidence, which helped to propel the market to 57 separate all-time highs, the fifth most in a single year.18
As with the UK, bond markets struggled despite optimism at the start of 2024. Hopes of plentiful interest rate cuts were subdued as inflation proved more stubborn than first thought. Treasury yields climbed during Q4 as markets pondered the potential inflationary impact of a Trump presidency and the monetary policy response this may force from the Federal Reserve.19 Once again, sovereign and investment-grade bonds suffered the most – particularly longer-duration bonds, which are more price-sensitive to swings in market sentiment on future interest rate paths.20
*(avoidance of recession after economic slowdown)
Europe
A poor final quarter for European stocks saw the MSCI Europe ex-UK index fall 3.6% after a tumultuous year21. The German economy suffered greatly in 2024 as manufacturing continued to decline, leaving it susceptible to recession as we enter the new year. Key factors include ballooning energy costs due to ongoing global conflicts, and the failure of German car manufacturers to compete in the electric vehicle market against the likes of China, where government subsidies have helped to arm manufacturers with vastly superior production costs.22 The prior market dominance in China of German combustion engine vehicles has evaporated, while the sudden cutting of EV subsidies by Scholz’s government late in 2023 proved a shock for manufacturers and buyers alike.23
Scholz himself suffered a shock late in the year when his coalition government collapsed, following the sacking of his finance minister over the state of the economy. German Bund yields rose in the aftermath as investors demanded a greater risk premium to hold the nation’s debt, while stocks rose too on the hope that a new government would be able to stir the economy into action.24
Political troubles were not limited to Germany, as France endured a rollercoaster few months after Macron’s snap election call in June. French bond yields leapt at the time, as the election led to a weakened government with a divided lower house. Despite a small rebound in the aftermath, yields had been rising steadily since, before shooting up once again as PM Michel Barnier failed to gain parliamentary support for his austere budget, subsequently being ousted after a no-confidence vote.25 During late November, French risk premiums surpassed Greece’s for the first time in history.26 Ratings agency Moody’s decision to downgrade France’s credit rating in mid-December27 shows the extent of the damage.
While the EURO STOXX 50 index returned 11.86% over the year,28 the fates of individual countries varied. France’s CAC 40 declined 2.2% over the year due to a combination of the political turmoil – which had knock-on effects on financial stocks in particular – and sizeable losses for luxury retailers, as Chinese consumer demand faltered due to the country’s own economic crisis. On the other end of the scale, the German DAX index gained 19% despite its own difficulties.29 This was partly down to the performance of tech stocks such as SAP, which has significant AI exposure,30 but also due to a large portion of German companies’ revenue coming from outside the German economy.31
Asia & Emerging Markets
Investors went into the year hopeful that one of the top-performing equity regions in 2023 would carry on its momentum. Despite one large bump along the way (we will get to the unwinding of the carry trade in a moment…), Japanese indices finished the year in strong fashion, with the TOPIX returning 13.22% in Sterling terms (and 24% in Yen).32 The corporate governance reforms that helped drive returns in 2023 continued to be a tailwind in 2024. Large cash reserves seen over the past decade were used through share buybacks and dividend payments. These reforms boosted Sentiment from foreign investors, along with a weaker Yen (hitting a 37-year low vs. the US Dollar)33 and healthier inflation levels. Equities were hit with a very large but short-lived fall following the unwinding of the Japanese Yen carry trade (investors benefitting from the historically low interest rates by borrowing in Yen and investing in higher-yielding currencies/assets). While there are several reasons for this unwinding, a reversal of the Bank of Japan’s monetary policy and a period of uncertainty spooked investors, causing a bout of volatility.
China continued to grapple with a fragile property sector and concerns about economic growth in 2024. Throughout most of the year, equity returns were volatile and lacklustre, but in September, Xi Jinping’s government announced a substantial stimulus package of 10 trillion Yuan (£1.4 trillion), which bolstered equities and helped the CSI 300 achieve a return of 16.92% in Sterling terms. However, worries regarding a Trump presidency and discussions of tariffs dampened returns in Q4.
Benefitting from their neutral stance on the global stage, India’s economy and markets continue to perform strongly with the MSCI India returning 13.2% over the year.34 More broadly however, the increase in US Dollar strength seen in Q4 provided headwinds for many emerging markets with the broader MSCI Emerging Market index falling 1.47%.35
Alternatives
Coming off the back of a tough 2023, it was a mixed bag for the commodities sector. Brent Crude oil fell from $77.50 per barrel to $74.69 over 2024,36 following lacklustre industrial production from China and geopolitical tensions such as those unfolding in the Middle East. Gold was one of the top performers following increased Central Bank purchases amid the sustained periods of uncertainty. The precious metal returned 29.49% in 2024,37 significantly outperforming the broader Bloomberg Commodity index, which returned 7.27% in Sterling. 38
Elsewhere, property was on course for a very strong 2024 as it seemed the direction of Central Bank policy had turned, however a dialling back of interest rate cut expectations in Q4 caused headwinds for the sector. The FTSE NAREIT Equity REITS returned 6.8% in Sterling over 2024. 39
Sustainability
Sustainable investing faced familiar headwinds in 2024, many of which have been discussed previously. While inflation has eased over the course of the year, and we may have seen the start of a series of interest rate cuts, sentiment and attitudes around sustainable investing continued to face some negativity. We have seen the rise of populism and the re-election of Trump, a flurry of banks such as Goldman Sachs and Wells Fargo leaving the Net-Zero Banking Alliance (NZBA),40 and a divergence of regional flows (namely the US and Europe) into sustainable investments.41 All of this proved troublesome for the theme, increasing the disparity between attitudes and policy.
On the regulatory side of things, progress has been made on the Financial Conduct Authority’s framework for sustainable investing, the Sustainability Disclosure Requirements. The much-needed anti-greenwashing rule came into force earlier in the year, and we are beginning to see an uptick in asset managers adopting sustainable investment labels. While the universe of these funds remains small, it was promising to see things move in the right direction as the year progressed
Global weather patterns continued to cause concern with worrying temperatures and a series of extreme weather events. Despite a slightly cooler summer (coolest since 2015), the UK experienced its 4th warmest year on record.42 Elsewhere, the severity of weather events remained apparent. We saw thousands of deaths and millions displaced following events such as heatwaves, droughts, wildfires, storms and floods.43
Performance
2024 provided a positive year for portfolios across the board, adding to the positive performance seen in 2023. Q4 was a strong quarter for all portfolios until December, when a few rogue inflation prints and the prospect of a second term for Trump rattled the markets. Whilst our sustainable portfolios continued to slightly underperform our conventional portfolios both over the year and through Q4, there continue to be positive signs as the underlying fund managers and the businesses they invest in are getting better and better at operating in the higher rate environment.
As we move into 2025 our strategic asset allocation work comes to fruition, and we set our asset allocations for the beginning of the year. This year has some changes to both the asset allocation calls and some underlying fund changes. More information on this will be sent around in due course. 2025 will no doubt be an interesting and potentially volatile year. We will continue, as always, to measure the macroeconomic environment, how this affects asset allocation and whether the underlying investments are the best building blocks.
1. Morningstar FTSE 100 TR GBP (01/10/2024-31/12/2024) -0.18%
2. https://www.reuters.com/world/uk/uk-firms-lose-more-momentum-cut-staff-december-wake-budget-pmi-shows-2025-01-06/
3. https://www.bankofengland.co.uk/monetary-policy-summary-and-minutes/2024/november-2024
4. https://www.reuters.com/world/uk/weaker-pound-puts-ftse-100-track-best-week-six-months-2024-11-22/
5. https://www.ft.com/content/80a4e2b5-6008-4974-b92f-ad47b527825a
6. https://www.reuters.com/world/uk/uk-economy-showed-zero-growth-q3-2024-12-23/
7. Morningstar FTSE 100 TR GBP (01/01/2024-31/12/2024) 9.66%
8. https://tradingeconomics.com/united-kingdom/government-bond-yield#:~:text=The%20UK%2010-year%20gilt%20yield%20stands%20at%204.54%25%2C,bps%20this%20year%2C%20underperforming%20US%20and%20German%20counterparts.
9. https://www.telegraph.co.uk/business/2024/12/18/ftse-100-markets-latest-news-uk-inflation-cpi-budget-tax/
10. https://www.ii.co.uk/analysis-commentary/how-bonds-performed-2024-best-and-worst-funds-ii533925
11. https://www.bloomberg.com/news/articles/2024-12-11/uk-stock-market-s-ipo-ranking-now-trails-oman-and-malaysia?sref=1LVTCemH
12. https://www.bloomberg.com/news/articles/2024-12-04/london-stock-market-shrinks-at-fastest-pace-in-over-a-decade-on-takeover-wave?sref=1LVTCemH
13. Morningstar S&P 500 TR USD (GBP Hedged) (01/01/2024-31/12/2024) 27.26%
14. Morningstar S&P 500 TR USD (01/01/2024031/12/2024) 25.02%
15. https://www.crowe.com/insights/president-elect-trumps-tax-proposals-at-a-glance
16. https://hilarykramer.com/tradingdesk/trading-desk-magnificent-7/#:~:text=Together%20with%20the%20remaining%20top%2010%20companies%2C%20the,small%20number%20of%20stocks%20creates%20a%20potential%20vulnerability.
17. https://finance.yahoo.com/news/magnificent-seven-stocks-grew-46-142658588.html#:~:text=The%20movie-inspired%20moniker%20refers%20to%20Alphabet%2C%20Amazon%2C%20Apple%2C,year%2C%20according%20to%20a%20report%20from%20Morgan%20Stanley.
18. https://www.benzinga.com/analyst-ratings/analyst-color/24/12/42678368/sp-500-hits-57-all-time-highs-in-record-breaking-2024-magnificent-7-drive-30-of-nasdaqs-surge
19. https://finance.yahoo.com/news/why-trumps-boost-treasury-yields-162644136.html
20. https://www.morningstar.com/bonds/bond-funds-hurt-by-rising-yields-q4-2024
21. https://am.jpmorgan.com/gb/en/asset-management/adv/insights/market-insights/market-updates/monthly-market-review/
22. https://www.dw.com/en/german-auto-industry-faces-make-or-break-year-of-2025/a-71148148
23. https://www.cleanenergywire.org/news/e-car-sales-plummet-germany-following-subsidy-cut
24. https://www.marketwatch.com/story/german-stocks-bond-yields-rise-after-ruling-coalition-collapses-snap-election-looms-6686196d
25. https://www.bloomberg.com/news/articles/2024-06-10/french-10-year-bond-yield-rises-to-highest-this-year-on-election?sref=1LVTCemH
26. https://www.morningstar.com/news/marketwatch/20241128229/frances-bond-yields-rise-above-greeces-for-first-time-amid-political-instability-in-paris
27. https://www.lemonde.fr/en/france/article/2024/12/14/moody-s-downgrades-france-credit-rating-to-aa3_6736050_7.html
28. Morningstar EURO STOXX 50 GR EUR (01/01/2024-31/12/2024) 11.86%
29. https://www.bloomberg.com/news/articles/2024-12-31/french-stocks-stand-out-with-2024-loss-as-political-risk-weighs?sref=1LVTCemH
30. https://www.euronews.com/business/2024/09/03/why-are-german-stocks-trading-at-record-highs-despite-looming-recession
31. https://www.dw.com/en/germanys-stock-index-dax-hits-20000-despite-economic-woes/a-68404996
32. Morningstar TOPIX 100 TR 01/01/2024 – 31/12/2024 GBP: 13.22%, Yen: 24%
33. https://japantoday.com/category/business/nikkei-ends-above-40-000-as-yen-falls-to-new-37-yr-low-vs.-dollar
34. Morningstar MSCI India TR 01/01/2024 – 31/12/2024 GBP: 13.2%
35. Morningstar MSCI EM TR 01/10/2024 – 31/12/2024 GBP: -1.47%
36. https://tradingeconomics.com/commodity/brent-crude-oil
37. https://app.koyfin.com/charts/g/fx-faleqt?i=g
38. Morningstar Bloomberg Commodity TR 01/01/2024 – 31/12/2024 GBP: 7.27%
39. Morningstar FTSE NAREIT Equity REITS TR 01/01/2024 – 31/12/2024 GBP: 6.8%
40. https://www.bloomberg.com/news/articles/2025-01-04/wall-street-banks-keep-quitting-major-climate-alliance?sref=1LVTCemH
41. https://www.morningstar.com/lp/global-esg-flows
42. https://www.bbc.co.uk/weather/articles/c1mrz200474o
43. https://www.independent.co.uk/climate-change/news/2024-climate-change-heatwaves-hurricanes-storms-b2670536.html