Markets in 2024: A Year of Surprises and Challenges
Despite starting the year with expectations of a global stock rally tapering off, sharp U.S. interest rate cuts strengthening Treasuries and weakening the dollar, and emerging market currencies gaining traction, the markets defied all predictions.
Global stocks are poised for a second straight annual gain exceeding 17%, shrugging off geopolitical crises in the Middle East and Ukraine, Germany’s recession and political upheaval, French fiscal challenges, and China’s economic slowdown.
This resilience has largely been driven by Wall Street’s stellar performance. A second consecutive year of significant gains, fueled by enthusiasm for artificial intelligence and robust economic growth, attracted global capital to U.S. assets. The dollar surged 7% against other currencies, and optimism soared following Donald Trump’s re-election on November 5, with his plans for tax cuts and deregulation. This optimism also lifted Bitcoin, which posted an annual gain of 128%.
As markets enter 2025, their increasing dependence on U.S. trends poses risks, especially after the Federal Reserve signaled fewer rate cuts in the upcoming year. This followed weak U.S. jobs data and an unexpected midyear rate hike in Japan, which jolted dollar-denominated assets, triggered market volatility, and caused a brief downturn in August.
Debt investors are wary of potential inflation from Trump’s proposed trade tariffs and concerns about heavy government borrowing disrupting the $28 trillion Treasury market and other global bonds.
Julien Lafargue, Chief Market Strategist at Barclays Private Bank, summed up the sentiment: “In the event of a U.S. pullback, it’s going to be difficult to find anywhere to hide.”
Wall Street’s Remarkable Streak
Wall Street’s S&P 500 index climbed 24% in 2024, its strongest two-year performance since 1998. Nvidia saw a staggering 172% rise, Tesla gained 69%, and U.S. tech giants—known as the Magnificent Seven—now account for a fifth of the MSCI world share index, raising concerns about market vulnerability.
Europe’s Struggles
European markets faced significant challenges. The euro fell 5.5% against the dollar, and European stocks underperformed their U.S. counterparts by the widest margin in 25 years. While four European Central Bank rate cuts slowed the economic decline, the region’s rebound is projected for 2025. Gold, a traditional safe-haven asset, gained 27% as diversification options remained limited.
Emerging Markets Under Pressure
The strong dollar and U.S. tariff concerns weighed heavily on emerging market currencies. Egypt’s and Nigeria’s currencies fell about 40%, Brazil’s real declined over 20%, while the Malaysian ringgit rose 2%, one of the few bright spots.
China’s Volatility
Chinese markets experienced sharp fluctuations, including a 16% surge in a single week following Beijing’s economic stimulus hints. Despite an annual gain of 14.5%, many investors expect further volatility until Beijing adopts stronger measures.
Bonds Face Challenges
Although interest rates dropped across major economies, bond investors saw losses as central banks delivered fewer rate cuts than expected. U.S. 10-year Treasury yields rose 60 basis points, Britain’s jumped 100 bps, and Japan’s increased by 45 bps, its largest annual rise since 2003.
Surprise Winners
Unexpected gains emerged in distressed markets. Lebanon’s defaulted bonds and Argentina’s dollar bonds each returned 100%, while Ukrainian bonds gained over 60%, buoyed by hopes of geopolitical resolution under Trump’s leadership.
The year 2024 proved unpredictable, driven by robust U.S. markets, geopolitical shifts, and evolving central bank policies. As 2025 begins, global markets remain exposed to U.S. trends, with challenges and opportunities ahead.
