Overall Market Summary
Global markets closed out 2024 with mixed performance as investors navigated a landscape marked by moderating inflation, uneven economic growth, and ongoing central bank interventions. Equity markets in developed economies showed resilience, supported by strong earnings and easing supply chain issues. Conversely, emerging markets experienced heightened volatility due to geopolitical tensions and currency fluctuations. Global bond markets reflected optimism, with yields stabilizing amid expectations of a pause in interest rate hikes.
United States
The U.S. markets ended the year on a positive note, buoyed by robust consumer spending during the holiday season and improving labour market conditions. The S&P 500 posted gains for December, led by the technology and consumer discretionary sectors. Inflation continued to decelerate, prompting the Federal Reserve to signal a potential pause in rate hikes for early 2025. However, concerns over corporate debt and a looming government shutdown added caution to the outlook.
Europe
European markets exhibited resilience in December, supported by strong performance in the energy and industrial sectors. A milder winter and better-than-expected natural gas reserves eased energy cost pressures, particularly in Germany and France. The European Central Bank maintained its tightening stance but hinted at slowing the pace of rate hikes, which lifted investor sentiment. Nonetheless, economic growth across the Eurozone remained subdued, with high borrowing costs dampening investment activity.
United Kingdom
The UK faced mixed economic signals as inflation showed signs of easing, but growth remained stagnant. The FTSE 100 saw moderate gains in December, driven by strong performance in financial and healthcare stocks. The Bank of England maintained a cautious stance, keeping rates steady after a prolonged period of tightening. Rising household debt and weak business investment were key challenges as the country prepared for slower growth in 2025.
Japan
Japan's equity markets closed December with gains, supported by a weaker yen and strong export data. The Nikkei 225 benefited from robust performance in the electronics and automotive sectors, while government stimulus measures aimed at boosting domestic consumption provided additional support. The Bank of Japan continued its accommodative monetary policy, although speculation about potential adjustments to its yield curve control policy kept bond investors on edge.
Asia (excluding Japan)
Asian markets delivered mixed results, with China's ongoing economic challenges casting a shadow over the region. Beijing's efforts to stabilize growth through fiscal and monetary stimulus yielded limited results, as consumer confidence and property sector woes persisted. Meanwhile, India and Southeast Asia outperformed, driven by strong domestic demand and foreign investment in manufacturing and technology sectors. The region remained sensitive to global trade dynamics and geopolitical tensions.
Emerging Markets
Emerging markets faced a turbulent December, with geopolitical risks and currency pressures dominating the landscape. Latin America experienced mixed results, as commodity exporters benefited from rising oil and metal prices, while political uncertainty in countries like Brazil weighed on sentiment. In Eastern Europe, markets were impacted by the ongoing conflict in Ukraine and its implications for energy and trade. Africa saw pockets of growth in the resource sector, but inflationary pressures remained a challenge.
Global Bonds
Global bond markets showed stability in December, with yields retreating as investors priced in the likelihood of slower rate hikes in 2025. U.S. Treasury yields fell slightly, reflecting optimism about a soft landing for the economy. European bonds saw improved demand as inflation pressures moderated. In emerging markets, local-currency bonds faced headwinds from exchange rate volatility, but hard-currency debt attracted inflows amid expectations of improving global liquidity conditions.
In summary, December 2024 marked a cautious yet optimistic close to a year of challenges and transitions in global markets. While the U.S. and Japan led gains among developed economies, Europe and the UK continued to face structural challenges. Emerging markets were hindered by geopolitical risks and currency instability, but selective opportunities emerged in commodity-focused regions.