It is hard to think of another year, like 2024, when headlines were this heavy.
Yet markets powered on to new highs. Equities, bonds, property and commodities all delivered strong returns. Let’s take a look at some of the events that punctuated 2024:
The Middle East conflict escalated significantly. Beyond the ongoing Gaza-Israel war, Iran launched missiles into Israel, and Israeli forces advanced into Beirut.
In Ukraine, the war intensified with the use of long-range missiles supplied by Western allies. Meanwhile, Poland, a NATO ally, are becoming increasingly anxious as tensions rise.
US politics took an unprecedented turn. Trump survived two assassination attempts, and the standing US President (Biden) was effectively ousted mid-term. Against all odds, Trump achieved a landslide victory to become the 47th President, winning the House and the Senate.
Trump continues to talk about punitive trade tariffs, which could hit supply chains. As a reminder, the main targets of his tariff agenda are the United States’ largest trading partners - Canada, Mexico and China.
In Europe, yields on French government bonds exceeded those of Greece. There is a lot of anxiety around the French economy and, therefore, its implications for the broader EU economy.
[Although we live in the UK, we felt that local headlines (like a new government and budget) were less impactful on global markets.]
These are not insignificant global events and yet the market reacted unpredictably. For instance, betting on an oil price rise this year would have been an obvious move with foresight. Yet, the oil price barely moved, up a paltry 3% year to date. Additionally, during times of global tensions, the US Dollar is considered a safe haven asset. Yet it did not gain in value, remaining flat against sterling. Equally, in a year of falling global inflation, albeit at slower than expected rates, gold has performed well. Aren’t we taught that gold is a good hedge if inflation is rising? We have also seen Bitcoin surge, a sign perhaps, that markets feel that risks are arbitrary. Furthermore, Canadian, Chinese and Mexican equities have not heavily responded to the tariff news, with Canadian equities up, and Chinese and Mexican equities only slightly down since the US election results were concluded.
As you can see, financial markets often invert expectations. Bad news can lead to positive outcomes, and good news doesn’t always guarantee success. For instance, 2009 saw some of the best returns from equities, despite the world being in the grip of a major global recession. Similarly, 2021 was also one of the best years for commercial property, even as many premises remained vacant because of Covid. Perhaps bad news, rather than good news, is an indicator of a good buying opportunity?
All considered, this has been a fascinating year, evidenced by rising markets and testing headlines. Given the unpredictable nature of global events, combined with the unforeseen market response to them, we are reminded that investing on the basis of any forecast is a low-odds endeavour. Also, as prices rise, so does the risk. Our preferred antidote to both is to focus on what is known: the price you pay for an investment. The lower the better. Then, avoid the noise around it and patiently wait. This is how we have built our long-term track record and continue to manage portfolios.
Published 3rd December 2024 : Fundhouse is the trading name of Fundhouse Bespoke Limited. Fundhouse provides investment management services and does not provide financial advice. Importantly, this note does not represent investment advice and any reader should always speak to their financial adviser before making any investment decisions. Please note that the value of any investment may go down as well as up and you may lose capital when investing and the value of your investments may not always increase. Please ensure that you are comfortable bearing financial losses and that you are comfortable taking a long-term investment view of five years or more
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