The year 2024 proved to be a pivotal one for financial markets, marked by resilience amid geopolitical tensions, evolving central bank policies, and a notable resurgence in investor confidence. Equity markets across the globe showed robust performance, with the S&P 500 closing the year up more than 23%, buoyed by strong corporate earnings and improved economic data from the U.S. labor market. Meanwhile, the MSCI World Index reflected a broader recovery, gaining over 19% for the full year.
Emerging markets, however, told a mixed story. While India and Brazil saw significant growth due to domestic reforms and increased foreign investment, countries like Turkey and Argentina faced continued struggles with inflation and currency volatility.
In fixed income, 2024 was a year of adjustment. Central banks began easing rates cautiously after years of aggressive tightening, leading to renewed interest in corporate and sovereign bonds. U.S. Treasuries gained ground in the latter half of the year as the Federal Reserve signaled a pause in its rate hikes, stabilizing yields.
Inflation and Monetary Policy: The Return of Stability
Inflation remained a central theme in 2024 but showed signs of cooling globally. In the U.S., inflation tapered to 2.7% by year-end, aided by falling energy prices and improved supply chain efficiencies. The Federal Reserve balanced its dual mandate adeptly, cutting rates several times during the year to support economic growth and stabilize markets after its aggressive tightening cycle of previous year
Across the Atlantic, the European Central Bank adopted a similar stance, maintaining rates while emphasizing its commitment to long-term stability. Notably, the Bank of Japan ended its decade-long ultra-loose monetary policy, a move that strengthened the yen and boosted investor sentiment.
Commodities: Energy Takes the Spotlight
Commodities experienced a volatile yet ultimately bullish year, led by energy markets. Oil prices rallied to near $90 per barrel in Q2, supported by OPEC’s production cuts and rising global demand. In Q4 oil prices stabilized around $70 per barrel. Natural gas prices also saw a resurgence due to geopolitical risks and an unusually cold winter in Europe and North America. Europe especially is bearing the brunt of natural gas prices, with Dutch TTF natural gas futures up nearly 55% over the year. Precious metals such as gold and silver benefited from geopolitical uncertainties, with gold, ending at over $2,600/ounce.
Key Economic Trends of 2024
Technological Transformation in Finance
Blockchain technology continued its integration into mainstream financial systems, with central bank digital currencies (CBDCs) gaining traction. The U.S. and EU both piloted successful CBDC programs, while China expanded its digital yuan project nationwide. Enthusiasm for AI throughout the business world generated intense demand for GPUs and other technology components.
Global Trade Realignments
The global trade landscape underwent notable shifts, with countries diversifying supply chains to mitigate risks. The U.S.-China trade dynamics stabilized somewhat, though tensions lingered. Meanwhile, the Regional Comprehensive Economic Partnership (RCEP) in Asia bolstered intra-regional trade. Some uncertainty in global trade relationships carried over into 2025 in anticipation of the incoming Trump administration.
Outlook for 2025
As we look ahead, several key themes are likely to dominate:
- Continued Rate Normalization: Central banks are expected to proceed cautiously with rate adjustments, prioritizing stability.
- Geopolitical Risks: Persistent geopolitical challenges, including conflicts and trade disputes, will remain critical risk factors for investors. The possibility of ceasefires in Ukraine and the Middle East in 2025 could offer an opportunity for de-escalation of international conflicts.