Market update: Fourth quarter 2024

The fourth quarter of 2024 showed a mixed picture. The major victory of the Republicans in the American elections had a far-reaching impact on the global stock markets.

Review of the fourth quarter of 2024: Under the spell of the American elections.

The fourth quarter of 2024 showed mixed results in the stock markets. The election of Donald Trump as president in November had a large-scale impact on the financial markets. In the U.S., this led to a strong increase in stock prices because investors expect that Trump's policies will lead to lower taxes, deregulation and subsequent profit growth. But the American stock market was tempered at the end of the month by a reduction in the number of expected interest rate cuts in 2025 by the American central bank, the Federal Reserve. Shares in the E.U. experienced a less favorable period. Political instability in France and Germany caused uncertainty, in addition to continued concerns about stagnation of growth. In emerging markets, the election of Donald Trump had a negative effect. Concerns about the consequences of possible American trade tariffs, especially against China, pushed stock prices down in these markets. In addition, the positive quarter in the U.S. led to the strengthening of the American dollar against the local currencies in emerging markets.

The bond markets also had a difficult quarter. Geopolitical tensions and persistent inflation dampened 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 led to a decline in confidence in government bonds. In Germany, the governing coalition of social democrats, liberals and greens has fallen and voters will go to the polls again on February 23, 2025. In France, Prime Minister Barnier lost the vote of confidence on the budget proposals, and had to submit the resignation of his cabinet to President Macron.

However, there was a bright spot in the bond market. High-yield corporate bonds performed well last quarter. Investors expect Trump's pro-business policies to be favorable for these companies, which increased the value of their bonds.

The influence of the United States

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

The negative performance of stocks in emerging markets is also a clear example of the influence of the U.S. The threat of possible import tariffs in America had a negative effect on emerging markets such as China. In addition, the dollar received a boost in the fourth quarter due to the positive developments in the American 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, the repayment of debts, which many emerging countries have in dollars, becomes more expensive.

Our advice: stick to your strategy

Do you now have to constantly follow the news from the U.S. 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., cannot be properly estimated in advance (although this may seem so in retrospect). 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 risk level. Fluctuations like these have little influence in the long term.

Keep your long-term goals in sight

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