Developed market (DM) equities had a poor end to the year, falling in December (MSCI World Index -2.6% MoM). However, that was not enough to undo a very good year for equity investors (MSCI World Index +19.2% YoY). Mega-cap tech companies defied the December gloom, doing enough to drag the Nasdaq 100 into positive territory for the month (+0.6% MoM) with strong contributions from Tesla (+17% MoM), Alphabet (+12% MoM), Amazon and Apple (both +6% MoM). The so-called “Magnificent Seven” cohort of mega-cap tech stocks ended 2024 collectively 48% higher YoY, including a 171% YoY gain by chip maker Nvidia. Emerging market (EM) stocks fared better than their DM peers in December (MSCI EM -0.1% MoM) but significantly underperformed their DM peers for the full year (MSCI EM +8% YoY). Chinese equities were the key to EM’s December outperformance as the Chinese government continued to announce measures aimed at boosting lacklustre economic growth.
The US Federal Reserve (Fed) announced a much-anticipated third consecutive rate cut at its December meeting, having cut rates by 1% (to 4.33%) since September. The press conference that followed the meeting and the release of the quarterly forecasts from Fed members painted a more hawkish picture than investors were anticipating, with the average Fed member now only anticipating 0.5% of rate cuts in 2025. The surprisingly hawkish tone from the Fed resulted in a spike in US rates, leaving the US government’s 10-year funding rate at 4.6% p.a. at year-end, the highest year-end mark for that rate since 2006. The spike in borrowing rates supported the US dollar, which was stronger against most major currencies for a second consecutive month. The US Dollar Index, a basket of DM currency peers against the US dollar, measured the greenback as 7.1% stronger YoY after a 2.6% MoM gain in December.
Brent crude oil ended the year at US$75/bbl, rallying in December (+2.3% MoM), though still ending the year lower (-3.1% YoY). Industrial metals (-1.4%% MoM and -1.6% YoY) struggled with a weaker Chinese economy, particularly iron ore (-2% MoM and -28% YoY). Gold was one of the better performers in 2024 (+27% YoY) despite a soft finish in December (-0.7% MoM).
