Monthly Review - December 2024
- 06 January 2025 (5 min read)
The markets
-2.5%
2.0%
2.3%
1.9%
1.4%
-0.4%
-1.4%
0.9%
3.9%
Source: Bloomberg 31.12.2024, returns in local currency
Top stories
Trump bump stumbles
The US Federal Reserve (Fed) poured cold water on hopes of multiple interest rate cuts next year, pushing the dollar to a two year high. Exuberant markets took a reality check. The S&P 500 and Nasdaq indices slipped from record highs and markets in Asia and Europe felt the downward pressure. The price of bitcoin, inflated by Trump’s plans to create a US strategic reserve of the cryptocurrency, eased back below $100,000. Meanwhile, President- elect Trump insisted the European Union must buy more US oil and gas, or “it is tariffs all the way”.
Hopes high for AI
Another stellar year for the tech sector was topped off by the CEO of Broadcom predicting “massive” AI demand growth in the next few years. The maker of custom AI chips, used by companies such as Alphabet and ByteDance to create their own generative AI offerings, became only the ninth US company to attain a $1 trillion market cap. Meanwhile, sales data indicated that Microsoft has bought twice as many of Nvidia’s flagship GPU chips as any of its US or Chinese rivals. The global battle for AI dominance looks set to hot up further.
Darkest days done?
European Central Bank (ECB) president Christine Lagarde claimed that the “darkest days of winter” are in the past, as the bank led the latest round of interest rate cuts. The Fed matched the 25 basis points cut, although with a more hawkish outlook, stating that their inflation projections had “kind of fallen apart”. Other central banks spoke of sticky inflation, with price pressures resolving more slowly. November data showed inflation creeping higher in the US and across Europe, while China and Japan continued to battle deflationary forces by maintaining a loose monetary stance.
“Let’s love nature”
While addressing more tangible measures such as carbon emissions, the financial services industry has historically overlooked biodiversity. Yet attitudes are changing, helped in part by regulation, such as the EU’s Corporate Sustainability Reporting Directive. The COP16 biodiversity summit in Colombia, which saw a significant financial sector presence, focused on reversing nature loss by 2030. “Let’s love nature” was a key message. Outcomes included advancing national biodiversity targets and identifying critical marine areas. Meanwhile, President Biden has unveiled new greenhouse gas emissions targets, attempting to galvanise global climate change efforts during his last few weeks in office.
On the radar
There are signs that Donald Trump and his adviser Elon Musk may face opposition within their own party. After Trump torpedoed a recent bipartisan funding bill, 38 Republicans voted against the president elect’s replacement proposal, which sought to remove the debt ceiling entirely.
The Federal Reserve’s more cautious outlook for interest rate cuts, which caused the US dollar to strengthen further, heralds potential future conflict with the president-elect. Outgoing US Treasury Secretary Janet Yellen warned against imposing sweeping tariffs, saying they would lead to higher inflation.
The Bank of Japan kept rates on hold in December. While markets are now expecting a rate hike in January, Governor Kazuo Ueda indicated the central bank wanted greater clarity on how Trump’s fiscal, trade and immigration policies would affect global financial markets before acting.