Market update: Fourth quarter 2024

The fourth quarter of 2024 showed a mixed picture. The Republicans' big win in the US elections had a far-reaching impact on global equity markets.

Looking back at fourth quarter 2024: Under the spell of the US election.

The fourth quarter of 2024 showed mixed results in equity markets. The November election of Donald Trump as president had a large-scale impact on financial markets. In the U.S., it caused stock prices to surge as investors expect Trump's policies to bring lower taxes, deregulation and subsequent earnings growth. But the U.S. stock market was tempered at the end of the month by a reduction in the number of interest rate cuts expected in 2025 by the U.S. central bank, the Federal Reserve. Equities in the E.U. experienced a less favorable period. Political instability in France and Germany created uncertainty, in addition to lingering concerns about stagnant growth. In emerging markets, the election of Donald Trump had a negative impact. Concerns about the impact of possible U.S. trade tariffs, particularly against China, depressed stock prices in these markets. In addition, the positive quarter in the U.S. caused the U.S. dollar to strengthen against local currencies in emerging markets.

Bond markets also had a difficult quarter. Geopolitical tensions and persistent inflation depressed confidence. The aforementioned tempering of expectations by the Federal Reserve in December caused a decline in the value of creditworthy bonds in the U.S. In Europe, political instability in Germany and France caused a drop in confidence in government bonds. In Germany, the coalition government of Social Democrats, Liberals and Greens fell and voters will go to the polls again on Feb. 23, 2025. In France, Prime Minister Barnier lost the confidence vote on budget proposals, and had to submit the resignation of his cabinet to President Macron.

Still, there was a bright spot in the bond market. High-yielding corporate bonds actually did well last quarter. Investors expect Trump's pro-business policies to benefit these companies, increasing the value of their bonds.

The influence of the United States

This quarter highlighted once again how great the U.S. influence is in global markets. U.S. companies play a dominant role in many sectors, such as technology, pharmaceuticals and consumer goods. That is why global equity funds, such as the Northern Trust World Custom ESG Equity Index Fund, often have a high weighting in U.S. stocks. This is because the weighting in these funds is based on the market value of companies. And since many of the world's largest and most valuable companies are American, they make up a large portion of such funds. The positive performance of U.S. stocks helped these funds advance significantly.

The negative performance of emerging market equities is also a clear example of the influence of the U.S. The threat of possible import tariffs in America negatively impacted emerging markets such as China. In addition, the dollar received a boost in the fourth quarter due to positive developments in the U.S. economy. A stronger dollar often has a negative effect on emerging markets. Commodities, such as oil and metals, become more expensive because they are traded in dollars. In addition, paying off debt, which many emerging countries have in dollars, becomes more expensive.

Our advice: stick to your strategy

Should you now constantly follow U.S. news and adjust your portfolio accordingly? No! It is impossible to time the market. In addition, the effect of certain factors, such as the presidential elections in the U.S., for example, cannot be properly estimated in advance (although it may seem that way in hindsight). Our advice remains the same: don't be guided by short-term market movements. The Vive investment model ensures that your portfolio is optimally diversified for your level of risk. Fluctuations such as these have little long-term impact.

Keep your long-term goals in sight

Don't let the market disrupt your long-term goals. Stay focused on your personal goals and adjust your portfolio only when your situation changes, not due to temporary fluctuations. Following a well-spread strategy remains the key to long-term success.