2024 was a good year for multi-asset portfolios, with markets demonstrating resilience amid a dynamic and volatile environment. Risk assets saw robust returns, driven by technological innovation, interest rate normalisation and falling inflation.
The macroeconomic backdrop remains complex, and although government bonds broke the consecutive negative annual returns they experienced in 2022 and 2023, debt sustainability, trade frictions and fiscal constraints play a pivotal role in the debt market going forward. As 2024 has shown, it pays to stay fully invested through the cycle.
UK
- The FTSE 100 Index went slightly unnoticed over the year and rose +9.7% off the back of strong corporate earnings.
- The earnings rebound in the UK was initially boosted by the election, however tax rises in the Budget poured cold water on some of the positivity.
- The increase in the National Insurance tax on employment proved particularly corrosive to business sentiment.
- After two interest rate cuts earlier in 2024, hopes of another in December were dashed as the Bank of England held interest rates at 4.75% off the back of an unexpectedly high inflation print.
- Revised data shows the UK economy failed to grow in the third quarter of the year.
Global
- Central banks, notably the US Federal Reserve (Fed), initiated interest rate cuts in the latter half of 2024 as inflation continued to fall. Inflation is now down markedly from the high levels of late 2022.
- US exceptionalism continued. The US economy surprised to the upside, driven by resilient consumer spending and AI investment. The S&P 500 Index delivered +25.5% for 2024.
- Although US tech delivered outsized returns, economic momentum did feed through to the wider US market and is set to continue into 2025.
- Europe weakened significantly, with manufacturing hit particularly hard due to a combination of high energy costs, damaging regulation, and a lack of export demand.
- Europe is facing greater economic challenges than the US. The impact of US tariffs on European exports is uncertain and there are political uncertainties within its two largest economies.
- In China, the stock indices remained almost unchanged. This is due to a combination of weak economic growth, political uncertainties and cautious investor behaviour.
- In Japan, a more optimistic picture emerged, and economic growth for the third quarter was revised upwards. Nevertheless, the economy is recovering slowly, and private consumption remains subdued.
Fixed interest
- Risk asset performance carried over into fixed income markets. High-yield bonds were the top performing sector for the fourth year in a row.
- The yield on 10-year US Treasuries rose in the fourth quarter because investors fear that Trump’s economic policy could increase inflationary pressure in the long term.
- Longer duration investment grade credit underperformed against a backdrop of rising government bond yields.
- UK gilts were the worst performing sector as the long duration of UK debt made it particularly sensitive to rising yields.
Other
- Commodities were held back by weak demand in China and the broad commodity index delivered +7.2%.
- Concern over the US fiscal direction led to strong performance from gold, which ended the year with returns of +28.4%.
- Trading volume in Bitcoin reached US$19tn in 2024, double the previous year’s US$8.7tn. The cryptocurrency reached all-time highs in 2024 and rose +115% for the year.
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This article is for general information purposes only and does not constitute financial advice or a personal recommendation. Past performance is not a reliable indicator of future results. Investments can rise or fall in value, and you may receive less than you originally invested. Tax treatment depends on individual circumstances and may change in the future.
