Sabco® Investment's Monthly Market Report - December, 2024

Sabco® Investment's Monthly Market Report - December, 2024

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December 2024 concluded a year of strong gains for global financial markets with a subdued performance, as investor sentiment was tempered by central bank policies, persistent inflation, and geopolitical uncertainties.​

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U.S. equities experienced a pullback, with the S&P 500 declining by 2.4% and the Dow Jones Industrial Average falling 5.3%. In contrast, the Nasdaq Composite managed a modest gain of 0.6%, buoyed by resilient technology stocks. Small-cap equities underperformed, with the Russell 2000 index dropping 8.4% for the month. Despite December's downturn, the S&P 500 achieved a 23.3% gain for the year, marking its fourth 20%+ annual increase in six years.​

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The Federal Reserve implemented its third rate cut of the year in December, reducing the federal funds target range to 4.25%-4.50%. However, the accompanying guidance indicated fewer cuts in 2025 than previously anticipated, leading to a rise in long-term Treasury yields. The 10-year yield increased to 4.57% by year-end, up from 4.18% in November.​

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In the bond market, the Bloomberg U.S. Aggregate Bond Index posted a 1.25% gain for 2024, despite a 3.06% decline in the fourth quarter. High-yield bonds outperformed investment-grade counterparts, with spreads tightening to historical lows due to strong demand.​

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International equities mirrored U.S. markets, with the MSCI All Country World Index falling 2.4% in December. The MSCI EAFE Index, representing developed markets outside North America, declined 2.3%, while emerging markets edged down 0.1%. Notably, Chinese equities rallied following the announcement of a ¥3 trillion stimulus package aimed at boosting domestic consumption.​

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In the UK, the FTSE 100 reversed November's gains, ending December down 2.8%. The UK's economy contracted by 0.1% in October, marking the second consecutive monthly decline. Inflation ticked up to 3.5%, raising concerns about the Bank of England's monetary policy trajectory.​

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European markets faced headwinds from political instability and economic uncertainty. The European Central Bank cut its deposit rate to 3%, while the Swiss National Bank implemented a larger-than-expected reduction to 0.50%. Despite these moves, investor confidence remained subdued amid ongoing geopolitical tensions and sluggish manufacturing activity.​

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Commodities delivered mixed results. Brent crude oil prices rose 2.3% in December, closing the year at $75 per barrel, while gold prices dipped 0.7% for the month but achieved a 27.2% gain for the year, reaching $2,625 per ounce.​

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The U.S. dollar strengthened by 1.8% in December, capping an 8.2% increase for 2024. This appreciation exerted pressure on emerging market currencies and contributed to capital outflows from these regions.​

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Cryptocurrencies experienced volatility, with Bitcoin briefly surpassing $100,000 before settling around $95,000 by year-end. The launch of U.S. spot Bitcoin ETFs and a more favourable regulatory environment under the new administration contributed to increased investor interest.​

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In summary, December 2024 reflected a cautious market environment, with investors digesting central bank signals, inflation data, and geopolitical developments. While the month concluded on a softer note, the year overall showcased robust returns across various asset classes, setting a complex stage for 2025.