Global equity markets, as measured by the MSCI ACWI Index, recorded modest losses in U.S. dollar terms over the fourth quarter, but still finished in positive territory for the 2024 calendar year. Strength in the U.S. could not offset downturns in other developed countries and emerging markets, which declined significantly in U.S. dollar terms during the quarter. There was a brief, sharp rally in the U.S. in the first half of November in response to former President Donald Trump’s victory in the presidential election, as investors expressed optimism that the new administration’s proposed tax cuts and loosening of regulations will boost economic growth. All three major U.S. equity market indexes—the Dow Jones Industrial Average, the broad-market S&P 500 Index, and the tech-heavy Nasdaq Composite Index—established record highs during the quarter. Among developed markets, Europe was particularly hard-hit amid concerns about political stability in France and Germany, as well as economic weakness. Emerging-market stocks lost ground due to investors’ concerns about the potential impact of Trump’s proposed tariffs on goods imported to the U.S., as well as disappointment regarding the Chinese government’s fiscal stimulus.
 

North America, the only region to end the quarter in positive territory in U.S. dollar terms, was the top performer among developed markets, lifted by the rally in the U.S. Conversely, the Nordic countries were the weakest-performing developed markets due mainly to downturns in Denmark, Sweden, and Finland. The significant underperformance of Europe was attributable mainly to weakness in Portugal and Ireland. The Gulf Cooperation Council (GCC) countries led the emerging markets for the month, due largely to strength in the United Arab Emirates and Kuwait, which garnered positive returns for the quarter. The weakest-performing emerging markets for the month included Latin America and the Association of Southeast Asian Nations (ASEAN), hampered mainly by market declines in Brazil and Indonesia, respectively.1 

Global fixed-income assets, as measured by the Bloomberg Global Aggregate Bond Index, declined 5.1% for the quarter.

High-yield bonds posted modest gains and were the strongest performers within the U.S. fixed-income market, followed by investment-grade corporate bonds, mortgage-backed securities (MBS), and U.S. Treasurys. Treasury yields declined for all maturities under one year over the quarter, and moved higher across the remainder of the curve. Yields on 2-, 3-, 5- and 10-year Treasury notes rose by corresponding margins of 0.59%, 0.69%, 0.80%, and 0.77%, ending the quarter at 4.25%, 4.27%, 4.38%, and 4.58%, respectively.2 The spread between 10- and 2-year notes widened from +0.15% to +0.33% over the quarter, as the yield curve remained positively sloped (longer-term yields exceeded shorter-term yields). A positively sloped yield curve generally indicates that the economy is expected to grow in the future

 

Global commodity prices, as represented by the Bloomberg Commodity Index, dipped 0.4% in the fourth quarter. The West Texas Intermediate (WTI) and Brent crude oil prices rose 5.2% and 4.1%, respectively, over the quarter due initially to concerns about the escalation of the military conflict in the Middle East (possibly leading to supply constraints) and, later in the quarter, a decline in inventory in the U.S. The gold spot price was down 0.7%, pressured by Donald Trump’s election victory, which sparked a rally in the U.S. dollar. (The gold price typically moves inversely to the greenback.) The 6.0% upturn in the New York Mercantile Exchange (NYMEX) natural gas price during the quarter was attributable to increased demand spurred by below-average temperatures in much of the U.S. in December, as well as forecasts for continued cold weather in January. Wheat prices were down 5.6% for the period, hampered by increased production in Argentina, as well as U.S. dollar strength. (The wheat price typically moves inversely to the U.S, dollar.)

Donald Trump, a Republican, defeated his Democratic Party opponent, Vice President Kamala Harris, winning majorities in both the Electoral College and the popular vote. Trump is the first U.S. president since Grover Cleveland— who served from 1885 to 1889, and 1893 to 1897—to be elected to two non-consecutive terms. The president-elect ran on a populist platform focused on illegal immigration, crime, tariffs, and tax cuts. 

On the geopolitical front, Ukraine launched U.S.-made long-range missiles into Russia for the first time in November. This action prompted Russian President Vladimir Putin to approve amendments to the nation’s nuclear doctrine, expanding the conditions under which Russia may use nuclear weapons. In Syria, Hayat Tahrir al-Sham (HTS), an Islamist militant group, led a rebellion against the government of President Bashar al-Assad in late November and early December. HTS initially occupied Aleppo, Syria’s secondlargest city, and then captured Damascus, the nation’s capital. Assad fled to Moscow, and the Russian government granted his request for asylum. The HTS subsequently formed a new transitional government in Syria.

Economic data 

U.S.

The Department of Labor reported that the consumer-price index (CPI) rose 0.3% in November, marginally higher than the 0.2% increase in October. The 2.7% year-over-year advance in the index was up slightly from than the 2.6% annual rise in October and was in line with expectations. Housing costs increased 0.3% and 4.7% in November and year-over-year, respectively. Transportation services costs were flat for the month but climbed 7.1% versus the same period in 2023. Prices for fuel oil and gasoline posted identical upturns of 0.6% in November, but tumbled 19.5% and 8.1%, respectively, year-over-year. The 3.3% rolling 12-month rise in core inflation in November, as measured by the CPI for all items less food and energy, matched the annual increase in October. 

According to the third estimate from the Department of Commerce, U.S. gross domestic product (GDP) grew at an annualised rate of 3.1% in the third quarter of 2024—up from the 2.8% initial estimate and slightly higher than the 3.0% increase in the second quarter of the year. The largest contributors to GDP growth for the third quarter included consumer spending, exports (which are added to the calculation of GDP), and nonresidential fixed investment (purchases of both nonresidential structures and equipment and software). Imports (which are subtracted from the calculation of GDP) increased over the quarter. The government attributed the quarter-overquarter uptick in the GDP growth rate to increases in exports, consumer spending, and federal government spending. These positive contributors offset a decline in private inventory investment and a larger decrease in residential fixed investment (a measure of the changes in values of inventories from one time period to the next). 

U.K. 

The Office for National Statistics (ONS) reported that inflation in the U.K., as measured by the CPI, ticked up 0.1% in November, down from a 0.6% rise in October. The CPI advanced at an annual rate of 2.6% in November, higher than the 2.3% upturn for the previous month. Costs for health care, alcohol and tobacco, and education posted corresponding increases of 6.9%, 5.5%, and 5.0%, year-over-year, while prices for transportation and furniture and household goods declined 0.9% and 0.4%, respectively, over the previous 12-month period. Core inflation, which excludes volatile food, energy, and alcohol and tobacco prices, rose by an annual rate of 3.5% in November, up modestly from the 3.3% year-over-year increase in October.3 

The ONS also announced that U.K. GDP growth dipped 0.1% in October, but edged up 0.1% over previous three months (the most recent reporting periods). The marginal decline in GDP for October matched the downturn in September. Output in the services and construction sectors rose 0.1% and 0.4% for the three-month period ending October 31, while production and construction output fell 0.3%.
 

Eurozone 

Eurostat pegged the inflation rate for the eurozone at 2.2% for the 12-month period ending in November, a slight decrease from the 2.3% annual upturn in October. Costs in the services sector rose at an annual rate of 3.9%, down marginally from the 4.0% gain in October. Prices for food, alcohol and tobacco increased 2.7% year-over-year in November, modestly lower than the 2.9% annual rate for the previous month. Energy prices fell 2.0% over the previous 12-month period in November following a 4.6% year-over-year downturn in October. Core inflation, which excludes volatile energy and food prices, increased at an annual rate of 2.7% in November, matching the year-over-year upturn for the previous month.5 

Eurostat also reported that eurozone GDP rose 0.4% in the third quarter of 2024, modestly higher than the 0.2% increase in the second quarter. The eurozone economy expanded by 0.9% year-over-year—an improvement from the 0.6% annual growth rate for the previous quarter. The economies of Lithuania and Cyprus were the strongest performers for the third quarter, expanding 1.1% and 1.0%, respectively. In contrast, GDP in Hungary and Latvia declined by corresponding margins of 0.7% and 0.4% during the quarter.
 

SEI’s view 

Global investors weathered quite a year in 2024, including global central bank pivots to easy monetary policy, voter pivots to opposition parties, rapidly rising national debt levels, and escalating geopolitical strife. Markets responded with solid returns for risk assets as monetary stimulus was added to the fiscal stimulus punch bowl. Fixed-income returns struggled, with rising longer-term yields fostered by stubborn inflation and swelling government debt. Precious metals and cryptocurrencies were notable performers on heightened demand from central banks and retail investors, respectively, while familiar themes repeated themselves—including another banner year for the “Magnificent 7” mega-cap tech stocks in the U.S. and another disappointing (if not slightly encouraging) year for Chinese stimulus expectations. Lastly, investors were treated to a lump of coal from U.S. policymakers in December, as the Federal Reserve (Fed) took a hawkish turn, calling into question the future path of policy rates in the world’s largest economy. 

Within the equity markets, corporate earnings have surprised to the upside and have shown strength outside of big tech, while lower taxes and less regulation should be a bigger boost to mid- and small-sized companies. In addition, markets outside of the U.S. are far from priced to perfection as both earnings expectations and valuation multiples have more room to move higher. We expect additional stimulus from the European Central Bank given weakness in the core of Europe and further efforts from China to find the right mix of both fiscal and monetary stimulus measures. 

Not surprisingly, we maintain our strategic recommendations for investors to stay diversified globally and focus on profitable companies with strong earnings momentum trading at reasonable prices. Given our views on the likelihood of higher interest rates and heightened volatility, we continue to lean into value and active management across our equity strategies. We favour sectors such as financials, industrials, and staples.

Within fixed-income markets, we remain cautious on interest rates and sanguine on credit. We believe the Fed is still biased toward lower rates (although we may see a pause in early 2025) despite core consumer price index and gross domestic product readings both above 3%. In addition, the reality of tariffs and immigration reforms may add additional fuel to the inflation fire early in the year. Therefore, given our outlook for higher long-term interest rates, we see headwinds for fixed-income returns. On a more positive note, while credit spreads have limited room to tighten, absolute yields remain attractive, defaults remain low, and maturities have been extended. Carry strategies in high-yield bonds and collateralised loan obligations (CLOs) should perform well.
 

Important Information 

This material represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events or a guarantee of future results. Positioning and holdings are subject to change. All information as of the date indicated. 

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