Annual Review - 2024
- 12 December 2024 (10 min read)
That was the year...
2024 was the year of elections. Incumbent leaders took a beating, culminating in the US presidential election, where Donald Trump regained power. Markets were pulled higher by the prospects for AI (artificial intelligence) and chip maker Nvidia briefly became the biggest company in the world. We present the pick of our top stories as the year unwound.
Changes at the top
The world’s major technology players are jostling for position on the leader board of largest companies. Microsoft has overtaken Apple as the world’s biggest stock, boosted by its exposure to AI from an investment in research organisation OpenAI. Not to be outdone, Apple leapfrogged Samsung as the world’s biggest mobile phone maker by volume, shipping almost 235 million handsets last year. Meanwhile, Tesla has lost its pole position as the world’s biggest electric car maker to China’s BYD, whose growth has accelerated. Tesla went on to issue a revenue warning, stating its sales growth would be “notably slower” in 2024.
The return of Trump?
Donald Trump trounced his rival for the Republican presidential nomination at the South Carolina primary. With ‘Super Tuesday’ bringing another dozen primaries in early March, commentators are outlining the likely shape of a Trump second term. Global trade is an early target, with 10% tariffs promised on all trading partners, rising to 60% on imports from China. As for the US economy, the renewal of Trump’s previous tax cuts is forecast. The repeal of the IRA green stimulus package is feared. And Jerome Powell’s position as chair of the US Federal Reserve could be under threat, after past clashes over interest rate policy.
Upside pivot
In Japan, the annual ‘shunto’ wage negotiations brought the biggest pay rises since 1991. Nippon Steel topped the list with a 12% increase. As inflation is still holding its 2% target, the Bank of Japan seized the chance to pivot on its ultra-loose monetary policy. After eight years in negative territory, interest rates now sit just above 0%. But as expectations for the first US Federal Reserve rate cut have been increasingly pushed into the second half of the year, the US dollar remained a more attractive investment and the Japanese yen slipped further.
Commodities outperform
In agricultural commodity markets, cocoa soared after adverse weather brought a poor harvest, forcing chocolate prices higher. Among precious metals, gold hit successive record highs, responding to sticky US inflation and uncertainty over the path of interest rates. Copper touched a thirteen month peak, buoyed by demand from Chinese electric vehicle (EV) producers. Meanwhile, rises in the oil price have been benign, despite production cuts and mounting geopolitical tensions. This matters in a US election year, as higher gasoline prices will alienate voters. A potential spike in the oil price has been dubbed ‘Biden’s kryptonite’.
First cut in June
Markets clung on to the belief that the European Central Bank (ECB) will take the first step to interest rate cuts at their meeting in early June. Helpfully, Eurozone inflation has continued its steady decline, meaning any wage demands can be reined back. Inflation data in the US and the UK have also crept lower, but failed to match forecasts, pushing rate cut expectations here back to September at the earliest. Meanwhile, equity markets continued to hit all time highs, as the glide path to lower rates remained very much in sight.
Nvidia on top of the world
Nvidia, the designer of the microchips that enable the generative AI boom, briefly became the most valuable company in the world. As its valuation touched $3.3 trillion, the company overtook Microsoft and Apple to take pole position. The order changed again when Apple showcased a “new personal intelligence system”, which links its voice assistant Siri to ChatGPT. The Apple share price powered to new highs. Since then, Apple has opted to delay the launch of AI-enabled features on its iPhones within the European Union (EU), due to concerns over stringent new tech regulation.
Disinflation stutters
According to the old adage, “inflation goes up like a rocket and down like a feather”. After a number of downward steps earlier this year, the IMF (International Monetary Fund) warned that the pace of disinflation now appears to be slowing. Which could leave interest rates set to remain “higher for even longer”. Both the ECB and the US Federal Reserve (Fed) kept rates unchanged in July, although betting odds on a September Fed rate cut moved to 100%. Meanwhile, a furious Donald Trump claimed a rate cut ahead of November’s election would boost the Democrat campaign.
Volatility spike
Markets were priced to perfection. But they were also jittery, as Q2 earnings season and the September Fed meeting loomed. A rate hike from the Bank of Japan, as well as somewhat imperfect tech sector results, triggered an early August correction. Volatility soared, with the Vix index briefly touching pandemic highs, before dropping sharply. The abrupt falls were followed by the longest streak of global market gains so far this year. An indication of persistent nervousness was the performance of gold, which topped its all time high, making a gold bar worth over $1 million.
A bumper rate cut
The US Fed lowered its benchmark rate by 50 basis points (bps). The scale of the move surprised some, but Fed chair Jay Powell dispelled recession fears, saying the US economy is in “a good place”. Markets responded positively to the Fed’s move, which should ease the path to an economic soft landing. Fed projections indicate another 50 bps of cuts this year, with a further 100 bps by the end of 2025. Elsewhere, the European Central Bank also cut rates, while in China short term rates were cut as part of a broader stimulus package.
A bigger bazooka
After the initial ‘combination punch’ of government stimulus, involving interest rate cuts and unprecedented stock market support, the Chinese finance ministry followed up two weeks later with stimulus for the property sector. Plans include bailing out local governments, recapitalising large banks and buying millions of unsold apartments. As yet there are few details of any fiscal stimulus, although that could come. The ultimate aim is to keep economic growth on track, most urgently the 5% GDP target for 2024. Trump tariffs of 60% on imports from China could be looming, even as the EU confirmed tariffs of up to 35% on imports of Chinese EVs.
Trump bump
Donald Trump will be the 47th President of the United States. A clean sweep for his Republican Party delivered a strong mandate for policies like tax cuts, deregulation and trade tariffs. He announced ‘Day One’ tariffs on Mexico, Canada and China, unless they block the flow of illegal drugs and migrants. US equity markets rediscovered their animal spirits in the weeks following the election. Tesla led the charge, as founder Elon Musk was appointed to run the newly created Department of Government Efficiency or DOGE. The price of Musk’s cryptocurrency Dogecoin bounced, while Bitcoin, which started the month below $70,000, surged towards $100,000.
The festive wrap
As the old year closes and a new one begins, certain questions continue to fixate the markets. Will Trump’s policies cause inflation to reignite? Will central banks pursue the path to lower interest rates? Expectations for AI technology look set to boost valuations further. Only time can tell how events will play out. In the meantime, we wish all our readers a happy and successful 2025!