Who made money in 2024?

10 February 2025

2024 was a pretty good year for equities. The global market benchmark returned 14.9% following a 20.6% gain in 2023.

The US equity market was, once again, the star, returning 25% in 2024. Years of US outperformance means that US equities now account for 74% of the MSCI developed market equity index and 56% of the total global market.

A handful of US technology stocks have driven US equities, and with it the global index. One calculation by DataTrek Research suggests that without the contribution of the so-called ‘magnificent seven’ big tech stocks (Amazon, Apple, Alphabet, Meta, Microsoft, Nvidia and Tesla) the S&P 500 would have risen 6.3% last year rather than the actual gain of 23%.

A strong US equity market can be seen, in part, as a reflection of the strength and dynamism of the US economy. Yet equity markets do not move in lockstep with GDP growth or, indeed, economic sentiment.

German equities returned 12% last year in the face of a shrinking economy and widespread gloom about the German economy. The Italian economy posted a lacklustre growth of just 0.5% in 2024 but Italian equities rose 16%. UK equities rose 9% last year even though sentiment and growth fell away in the second half of the year.

The point is that equity indices offer a very partial view of the health of the underlying economy. Such indices are dominated by multinationals that do not reflect the makeup of national output in which small and unquoted businesses and the public sector play a large role. Currency moves, and expectations of future growth and interest rates, are crucial for equity valuations, but less so for current activity (a weaker euro and the expectation of significant reductions in euro area interest rates helped bolster euro area equities, especially exporters, last year).

A further difference is in the composition of indices. As the outsize role of tech in the US shows, sectoral weightings and performance are everything. One buoyant sector – or large company – can propel a whole index higher. European markets were helped last year by a strong performance from financials which have benefitted from higher interest rates. German renewable stocks also did well, and shares in Germany’s SAP, which is one of the continent’s handful of major tech companies, rose almost 70%.

The point is that equity performance is country specific, idiosyncratic and driven by expectations. China illustrates this. Chinese equities rose 24% last year, a remarkable performance given the level of doubt about the country’s growth potential and worries about the impact of US tariffs. The principal driver of the recovery was the government’s announcement of a series of measures to boost growth and equities. Investors, eyeing a market that looked cheap on international yardsticks, responded enthusiastically. The market has fallen since its October peak, largely on concerns about the risk of a US-China trade war. The performance of Chinese equities this year is likely to be heavily influenced by the willingness of the Chinese authorities to continue to ease policy.

2025 has seen something of a reversal in stock markets, with Europe slightly outperforming the US. Euro area equities have returned 7% so far this year and the UK market is up 6%. US equities have risen by 4%.

The US market has been hit by a couple of wobbles this year. In early January, concerns over the persistence of US inflation and impact of the new administration’s policies drove up interest rate expectations in the US and around the world. Then the news that China’s DeepSeek appeared to have cracked the problem of creating cheap, proficient AI models prompted a wave of panic in the US tech sector. The US company providing the pick-axes for the AI gold rush, NVIDIA, saw the largest one-day fall in market capitalisation of a single stock in history.

European stocks also seem to be benefitting from the strength of the dollar. This increases the attractiveness of European exports and boosts the euro and sterling value of repatriated dollar income. The strength of the US economy means that US interest rates are likely to stay higher relative to European rates where markets are pricing in significant reductions in the next year.

Turning to other assets, 2024 wasn’t a good year for investors in government bonds. A global index of government bonds returned just 2.7%, far below the 15% return on equities (holders of UK bonds, or gilts, lost 4% last year). Bonds have been hit by the slow pace of interest rate reductions, concerns about levels of government debt and persistent inflation.

House prices in most rich countries rose in 2024 following declines in 2023 but lag far behind returns on equities. The latest available data show that house price inflation in the US and the UK is running around the 4.0% mark with prices in the euro area up 2.6% in the last year.

Holding cash has not been a bad option over the past 12 months, with a Vanguard sterling money market fund returning 5.1% and a dollar money market fund returning 5.2%.

In terms of more exotic investments, gold has done well, rising 27% in 2024 and a further 10% so far this year. The possibility that the new US administration could apply tariffs to imports of gold has bolstered prices and triggered stockpiling in the US. Some speculate that central banks and governments might seek to switch out of dollars and into gold on worries about potential US sanctions. These factors, together with lingering concerns about inflation, have propelled the gold price close to an all-time high.

Bitcoin has also had a strong run, more than doubling in value in 2024. In January Mr Trump launched his own meme coin $TRUMP at a price of $7. It quickly rose to $74 but has since fallen back and is now trading at $18.

Things have been difficult in two other niche markets. The classic car market in the US and the UK has struggled for the past two years, with prices mainly flat to down. One commentator suggested that demand for older classic cars may be waning as their owners age. The fine wine market has been falling since a peak in late 2022 and is down nearly 24% over the past two years. Wine has struggled as an asset class since it doesn’t provide a yield; falling demand from Chinese buyers has added to the sector’s woes.

Equities have certainly had a good run, but that performance has been heavily dependent on a handful of US tech companies. The ‘magnificent seven’ US tech stocks now account for 25% of the US equity market and 15% of the global equity market. Apple is currently worth more than the entire UK stock market.

Such a concentration in one sector in one country raises fears that the US and global equity indices are less diversified than in the past. Valuations are also high. The price earnings ratio, a measure of a company’s share price relative to its earnings per share, is currently running at around 28x, significantly higher than the US market average of around 18x over the past 50 years. The last time valuations were running at these sort of levels (aside from during the pandemic, when earnings did odd things) was during the dot-com bubble in the late 1990s and early 2000s.

Many commentators have drawn comparisons to that era which was followed by ten years of near flat returns from US equities. As in the late 1990s, today’s soaring valuations are premised on a new technology – this time AI – delivering a step change in productivity growth across economies. Let’s hope the markets are right.

OUR REVIEW OF LAST WEEK’S NEWS
The UK FTSE 100 equity index ended the week up 0.3% at 8,701.

Economics

US president Donald Trump said he would impose 25% tariffs on all imports of steel and aluminium and announced “reciprocal tariffs” on all countries later in the week
The US delayed the imposition of 25% tariffs on imported goods from Canada and Mexico by 30 days, following agreements with both countries to reinforce border security
Following the US imposition of an additional 10% tariff on imported Chinese goods, China announced measures including import tariffs on US energy sources, export control on rare metals and an antitrust probe against Google
The EU and UK are planning retaliatory measures against the possible imposition of US import tariffs, the FT reports
The US added 143,000 jobs in January, below expectations of 170,000, while the unemployment rate fell to 4%
US consumer confidence unexpectedly declined in February to a seven-month low, according to the initial estimates by the University of Michigan
More than 40,000 US federal workers have voluntarily resigned as part of the government’s plans to reduce its workforce, The Wall Street Journal reports
The Bank of England cut interest rates by 0.25 percentage points to 4.5%, noting that while “substantial progress” has been made on disinflation, they will take a “gradual and careful approach” to future interest rate cuts
The Bank also reduced its growth forecast for the UK in 2025 to 0.75% from 1.5% in November, amid weaker than expected current demand and declining business and consumer confidence
UK construction activity unexpectedly fell in January for the first time since February 2024, according to surveys of purchasing managers
UK house prices increased by a more than expected 0.7% in January, reaching a new high of £299,138, according to Halifax
UK car registrations fell 2.5% in January compared with the same month last year, the fourth consecutive month of decline amid low consumer confidence
Research published by the UK Department for Work and Pensions suggested that 200,000 people claiming health and disability benefits would be “ready for work now if the right job or support were available”
The head of the Office for National Statistics, Sir Ian Diamond, said he was “very confident” in the data that shows an increase in the UK’s inactivity rate, amid uncertainty over findings from the ONS’ Labour Force Survey due to low response rate
Gold prices hit a record high last week amid the threat of potential US tariffs
The euro area inflation rate increased marginally to 2.5% in the year to January
German industrial production fell in December to its lowest level since May 2020, mainly attributable to declining output in the automotive industry
OPEC+ confirmed its plan to start reversing production cuts in April following multiple postponements in 2024

Business

Sales by electric car manufacturer Tesla, owned by Elon Musk, fell across Europe in January compared with the same month last year, with Chinese rival BYD selling more electric vehicles in the UK for the first time
The head of industrial and energy company Melten Energy and Metals, Evangelos Mytilineos, said that London’s stock market is better than New York’s to float companies on as it avoids “the risk of disappearing in the crowd”
Music streaming company Spotify reported its first annual profit since its launch in 2008, amid price increases and growth in subscriber volumes
Energy company Shell has restarted production in the North Sea’s Penguins oilfield following the installation of new infrastructure, while Equinor announced plans to increase oil production
Planned reforms by the European Commission would make more than 80% of EU companies exempt from paying additional tax as part of the incoming carbon border adjustment mechanism

Global and political developments

US president Donald Trump said the US should immediately work with Iran to reach a “verified nuclear peace agreement”, following an executive order to restore “maximum pressure” on the country
Mr Trump said the US wants a deal to access Ukraine’s rare earth materials in return for their continued support against Russia
Staff working for the US Agency for International Development were placed on leave following an earlier executive order by Mr Trump to halt foreign assistance payments
US secretary of state Marco Rubio said that Panama needed to reduce Chinese influence over the Panama Canal or the US would “take measures necessary to protect its right under the treaty”
UK prime minister Sir Keir Starmer attended the European Council of EU leaders, the first UK prime minister to do so since Brexit, to discuss defence and security cooperation as part of his intended “reset” relationship with the EU
Mr Starmer announced changes to the planning system that will reduce the timeline to build new nuclear power stations
The UK’s electoral rules are outdated and have a “series of weaknesses”, according to the chair of the Electoral Commission, John Pullinger, amid unease over foreign influence via political donations and social media
The UK government relaunched an expanded version of the Net Zero Council, tasked with driving the clean energy transition and supporting economic growth
Last month was the hottest January on record globally, according to the European Copernicus Climate Change Service, despite expectations of slightly cooler temperatures compared to January 2024

And finally… Pennsylvania State Police are yet to find any clues into the theft of 100,000 eggs worth approximately $40,000 from a trailer in the municipality of Antrim Township, potentially motivated by the soaring costs of eggs in the US – police is hatching a plan to crack the poacher’s activities

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