Despite political upheavals and global uncertainties, 2024 turned out to be an extraordinary year for global financial markets, with stock markets and Bitcoin shattering records. The driving forces behind this surge included investor optimism surrounding artificial intelligence (AI), falling interest rates, and hopes of forthcoming tax cuts. Here are four key highlights from a year of remarkable growth in financial markets:
1. Wall Street Soars to New Heights
In the United States, Wall Street’s three major stock indices reached unprecedented levels, breaking record highs throughout 2024. The Dow Jones Industrial Average surpassed the 45,000-point mark, the S&P 500 climbed above 6,000, and the NASDAQ Composite broke past the 20,000 threshold. This historic performance was fueled primarily by the rise of technology shares, especially those linked to AI advancements.
Christopher Dembik, Senior Investment Adviser at Pictet Asset Management, stated, “It was an exceptional year, driven by the performance of tech shares thanks to artificial intelligence.”
By the close of the year:
- The Dow finished with a gain of approximately 13%.
- The S&P 500 rose by more than 23%.
- The NASDAQ, dominated by tech stocks, achieved an impressive annual gain of 29%.
One of the standout performers was Nvidia Corp, whose stock surged by over 170%. Nvidia’s processors, critical for running AI applications like ChatGPT, became the poster child of the AI revolution. Ipek Ozkardeskaya, Senior Analyst at Swissquote Bank Ltd, noted, “Nvidia, which has become the icon of the AI rally, gained almost 1,000 percent since then.”
2. European and Asian Markets: Milestones Reached
While the gains in Europe were less pronounced than in the US, there were still significant achievements:
- Germany’s DAX index surged by 18.9%, reaching the 20,000-point level, driven largely by strong performances from companies like SAP AG, which saw a 70% rise.
- Japan’s Nikkei 225 index posted a robust 20% increase, surpassing the peak it reached before Japan’s asset bubble burst in the 1990s.
These gains underscored a broader global rally in equity markets, with tech stocks continuing to lead the charge.
3. Political Events Shape Market Sentiment
While the markets were generally bullish, political developments also played a key role in shaping investor sentiment. The US election results in November gave Wall Street a boost, with hopes that President-elect Donald Trump would deliver on promises of deregulation and tax cuts, which the market viewed as conducive to growth.
Pierre Bismuth, Director at Myria Asset Management SAS, explained, “The market considered that will mean more growth and for longer.”
However, political instability in some regions created volatility. In France, President Emmanuel Macron’s decision to call early parliamentary elections backfired, leaving no clear winner. The Paris CAC 40 index, which had gained over 6% ahead of the election, ended the year down by more than 2%. Furthermore, weakness in China contributed to a decline in luxury stocks, impacting global market sentiment.
Investors are now closely monitoring Trump’s potential tariff hikes and the outcome of Germany’s early elections scheduled for next month, as these could have significant ramifications for global trade and economic growth.
4. Cryptocurrency, Commodities, and Gold Soar
Bitcoin and other cryptocurrencies also had a stellar year. Riding high on expectations of deregulation under President Trump, Bitcoin broke through the $100,000 mark, rising more than 120% over the year. Ethereum also saw substantial growth, rising more than 40%, although it did not set a new all-time high.
In the commodities markets, gold set a new record as its safe-haven appeal surged amid geopolitical uncertainties. Similarly, other commodities like coffee and cocoa reached new price highs. Arabica coffee saw prices increase by 67%, while cocoa prices soared by a staggering 172%. The significant rise in commodity prices was driven by poor weather conditions that disrupted supply chains.
However, soybeans emerged as the worst-performing major commodity, dropping 24% over the year. The surplus in production from the US and Brazil, coupled with a slowdown in Chinese demand, caused prices to plummet, marking the biggest annual drop for soybeans in two decades.
5. Monetary Policy Shifts and Volatile Markets
On the monetary policy front, 2024 was a year of transition. After the inflation surge sparked by the post-COVID recovery and the Russian invasion of Ukraine, central banks across the US and Europe began to cut interest rates.
Switzerland led the way with rate cuts in March, followed by the European Central Bank in June, and the Bank of England and US Federal Reserve in September. These cuts were intended to balance inflation control with economic growth.
However, central banks were cautious, seeking a balance between cutting rates fast enough to support growth without sparking renewed inflation. Volatility crept into the markets as investors tried to gauge the central banks’ next moves. In the US, the Federal Reserve began paring back expectations for further rate cuts, particularly in light of the potential inflationary pressures from Trump’s proposed tariffs. Meanwhile, the ECB signaled that it may continue cutting rates in response to stagnation in the eurozone economy.
Conclusion
2024 was a year marked by historic highs for global financial markets, driven by the rise of AI, surging tech stocks, and investor optimism fueled by falling interest rates and potential tax cuts. While political and geopolitical challenges remained, markets showed resilience, with the US stock indices, Bitcoin, and commodities leading the way. The year closed with a sense of cautious optimism, with investors awaiting the outcomes of political developments and monetary policies that could shape 2025.
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