December 2024 Market Summary

2024 has proven favourable for investors with exposure to equity markets as part of a diversified portfolio. This period has been marked by significant global election  activity which, while contributing to market volatility, aligns with historical trends where markets tend to stabilise and trend upwards in the months following  elections. Such movements underscore the importance of maintaining a balanced investment approach amid political and economic shifts.

Market performance overview

Over the previous 12 months to the 2 December 2024, the top indices from around the world have shown growth despite market volatilities and different setbacks.  They are reflected as below:

• FTSE 100: +10.35%
• S&P 500: +32.01%
• Europe’s STOXX 600: +9.75%
• Japan’s Nikkei 225: +15.89

UK insights

U.K’s October Inflation figure came out at 2.3% for the year-on-year change in prices that make up the Consumer Price Index (CPI), an increase from September’s  data which showed a 1.7% year on year increase. The cause is due to the increase in the energy price cap, which was raised on 1 October this year. Following the Bank of England’s base rate cut in November, Andrew Bailey has warned that future rate cuts will be more gradual, to ensure that inflation rate target can be maintained in the long run. The Monetary Policy Committee which decides monetary policy action meets for a final time in 2024 on the 19 December.

Other economic developments

USA

Across the pond, inflation data in U.S increased to 2.6% in October from 2.4% recorded in September, marking the first increase in inflation in 7 months. This
comes as inflation costs across the US declined by less than previous months, and inflation for sectors such as food and transportation remained equal. This data
again brings into question how fast future rate cuts will happen, with the Federal Reserve meeting on the 17 and 18 of December.

The announcement that Donald Trump will return to office as the 47th President of the United States has already had positive effects on top U.S markets, with the
S&P 500, Nasdaq and Russell 2000 already up by over 5% in the previous month alone.

Bonds

Following the U.K budget at the end of October, which markets generally reacted neutrally to, the U.K 10-year gilt yield increased throughout November up to
4.5%, before gradually reducing back to 4.2% at the end of that month, following the Bank of England rate cut announcement. The U.S 10-year treasury painted
a similar picture, with rates hitting 4.2% again on 2 December, with further expectations of rate cuts.

Asia

In China, the $1.4 trillion stimulus package has already had positive effects on manufacturing, with the China Purchasing Managers Index (PMI) up in November,
reflecting the positive sentiment of this by business owners. However, investors still have concerns on the pace of the rollout, which is happening over several
years, and whether the size will have enough of an impact to keep China’s GDP growth rate above 5%. There are also concerns around the tariffs that President
Elect Donald Trump could enact on Chinese exports, and whether these costs will need to be absorbed by businesses or passed onto the underlying consumer.

In Japan, the yen has moved up in value vs the dollar, following a slow decline in October. This follows better than expected CPI data for Tokyo which was released last week and shows core inflation up 2.2% in the previous 12 months, bringing the yen back to ¥150 to the U.S dollar.

Europe

Preliminary data from Europe shows the Eurozone annual inflation edged upwards in November to reach 2.3%, slowly heading away from the ECB’s annual target of 2%. However, within this figure, consumer prices fell by 0.3% from October to November,  supporting the notion that disinflation is continuing, paving a path for future rate cuts.

Manufacturing in Europe remains weak, particularly with export orders being down sharply as the eurozone economy is struggling to attract demand from abroad.  The ECB has already cut rates 3 times this year attempting to encourage investment and growth, but apparently without much effect so far. If the incoming Trump administration hits the eurozone with further tariffs, which is expected by economists, then the long-term effects could be substantial, and policy makers may need to consider other options to reignite growth.

This article is intended for information only. It is not financial advice or a recommendation and should not be considered as such. If you are unsure whether an investment is right for you, please seek independent financial advice. If you choose to invest, please remember the value of investments and any income derived from  them can fall as well as rise and you may get back less than you put in.