Global markets defied expectations in 2024, delivering robust performances despite geopolitical tensions, economic slowdowns, and volatile interest rate policies. Against a backdrop of wars, trade uncertainties, and inflation concerns, world stocks achieved a second consecutive year of gains exceeding 17%. With Wall Street leading the charge, the year also saw dramatic movements in currencies, commodities, and bond markets. As we approach 2025, the global economy appears increasingly influenced by U.S. trends and policy decisions, raising both opportunities and risks for investors worldwide.
Wall Street’s Dominance in 2024
The U.S. stock market was the standout performer, with the S&P 500 climbing 24% in its best two-year streak since 1998. Artificial intelligence fever fueled massive gains in tech stocks, including Nvidia, which surged 172%, and Tesla, which rose 69%.
The combined value of the “Magnificent Seven” U.S. tech giants now accounts for nearly 20% of MSCI’s world share index, raising concerns about market vulnerability if these companies fail to meet lofty expectations. President-elect Donald Trump’s November election victory added to market optimism, with promises of tax cuts and deregulation further boosting investor confidence.
Julien Lafargue, chief market strategist at Barclays Private Bank, warned, “It’s going to be difficult, in the event of a U.S. pullback, to find anywhere to hide.”
Europe’s Continued Struggles
European markets lagged behind their U.S. counterparts, delivering their worst relative performance in 25 years. The euro weakened by 5.5% against the dollar, reflecting ongoing economic challenges despite four rate cuts by the European Central Bank.
While some analysts predict a rebound for Europe in 2025, the region remains under pressure. French budget turmoil and Germany’s economic contraction have further undermined investor confidence. Gold’s 27% gain in 2024 highlighted the lack of appealing diversification options for global investors seeking alternatives to U.S. assets.
The Resilience and Risks of the Mighty Dollar
The U.S. dollar surged 7% in 2024, driven by strong economic growth and rising interest in U.S. assets. However, this strength came at a cost for emerging market currencies. Egypt and Nigeria experienced devaluations, with their currencies falling around 40%. Brazil’s real also declined by over 20%, reflecting concerns about government debt and spending.
“We continue to be cautious on emerging market currencies, and the main reason behind that is the Trump trade war,” said Arif Joshi, co-head of emerging market debt at Lazard Asset Management.
China’s Rollercoaster Year
China’s stock market had a turbulent 2024, characterized by dramatic swings. A mid-September rally saw a single-week gain of nearly 16% after Beijing signaled plans to stimulate its weakening economy. Despite these fluctuations, investors who stayed the course were rewarded with a 14.5% annual gain.
However, the boom-and-bust cycle has left markets in Europe and Asia on edge. Until Beijing implements more direct economic interventions, volatility in Chinese markets is expected to persist.
Bond Markets Under Pressure
Bond markets faced a tough year as central banks delivered fewer rate cuts than expected, while inflation remained stubbornly high. U.S. 10-year Treasury yields rose by 60 basis points, and Britain’s 10-year gilt yields jumped 100 basis points.
In Japan, where rates increased twice, the 10-year bond yield rose 45 basis points—the largest annual jump since 2003. Investors are now wary of how Trump’s policies might influence the Federal Reserve in 2025. French debt turmoil late in the year also signaled the readiness of bond vigilantes to penalize excessive government borrowing.
Surprising Winners in 2024
Some of the year’s most remarkable returns came from high-risk investments. Lebanon’s defaulted bonds gained 100%, as investors speculated on the Middle East conflict’s impact on Hezbollah. Argentina’s dollar bonds also returned 100%, buoyed by the country’s ambitious reform agenda and close ties with Trump.
Ukrainian bonds, supported by hopes that Trump could broker an end to Russia’s invasion, delivered over 60% returns, showcasing the opportunities in distressed markets during times of geopolitical uncertainty.
Looking Ahead to 2025
As 2025 begins, global markets remain closely tied to U.S. trends, amplifying risks for international investors. While Wall Street’s performance continues to attract global capital, uncertainties surrounding Trump’s policies, inflation, and geopolitical tensions could reshape the investment landscape.
For investors, diversification and adaptability will be key strategies in navigating the challenges and opportunities of the year ahead. The lessons of 2024 underscore the importance of staying informed and agile in an increasingly interconnected global economy.