Global Markets Defy Expectations with Surprising Gains
As the year comes to a close, global markets have proven to be resilient, shrugging off concerns of a slowdown and instead posting impressive gains. Despite predictions of a decline, world stocks are on track to record a second consecutive annual gain of 16%, driven largely by the strong performance of Wall Street.
Wall Street’s Dominance
The S&P 500 share index has surged 24% this year, marking its strongest two-year streak since 1998. Artificial intelligence chipmaker Nvidia has seen its shares skyrocket by 178%, while Elon Musk’s carmaker Tesla has gained 68%. The combined value of the top seven U.S. tech stocks now accounts for around a fifth of the global share index, raising concerns about market vulnerability if their earnings or AI technology disappoint.
Europe’s Struggles
In contrast, European stocks have underperformed their U.S. peers, with the euro sliding around 5.7% against the dollar this year. Despite four European Central Bank rate cuts, the euro zone economy is still declining, although some forecasters are predicting a rebound in 2025.
Emerging Markets Feel the Pinch
Emerging market currencies have been hit hard by U.S. tariff fears and dollar strength, exacerbating losses for struggling nations. Currencies in Egypt and Nigeria have fallen around 70% against the dollar, while Brazil’s real has weakened more than 27%.
China’s Rollercoaster Ride
Chinese stocks have had a wild year, surging almost 16% in a single week in September before experiencing deep weekly falls. Despite the volatility, investors who held on to China in 2024 were rewarded with an 16.5% annual gain.
Bond Markets Take a Hit
Interest rates fell across big economies this year, but bond investors suffered annual losses as central banks failed to deliver the expected monetary easing. U.S. 10-year Treasury yields rose nearly 70 basis points, while Britain’s 10-year gilt yield jumped 107 bps.
Surprise Winners
However, bond investors did find success in some of the riskiest markets. Lebanon’s defaulted dollar bonds returned around 100% over the year, while dollar bonds issued by Argentina returned 100% due to an ambitious reform programme and the prospect of Trump’s White House return. Ukrainian bonds also returned over 60% as investors bet on Trump ending Russia’s Ukraine invasion.
As markets enter 2025, investors are increasingly exposed to U.S. trends, which poses a significant risk factor. With debt investors growing anxious about Trump’s proposed trade tariffs and excessive White House borrowing, the coming year looks challenging for global markets.
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