Market Updates
Quarterly updates on financial markets
Quarterly update – Q4 2024
The last three months of 2024 continued the pattern of the rest of year, with positive returns from global equities. Ongoing concerns about persistent inflation continued to worry investors, however, putting pressure on longer-dated government bonds in particular.
Two topics dominated investors’ minds over the period: the US presidential election and inflation. The first of these was resolved in early November, when US voters elected Donald Trump as President for a second term. The S&P 500 saw a substantial uplift after the result, in part because his policies were seen as more supportive of corporate profits but also because a significant area of uncertainty was removed.
Inflation remained a trickier topic, that continues to confound expectations. The US Federal Reserve cut rates in November and December – bringing the total number of cuts to three for 2024, a total reduction of 1% in the Fed Funds rate – but commentary that came with the December decision indicated that cuts in 2025 would be slower than previously anticipated. This had a chilling effect on global markets as it indicates that inflationary forces remain in play in the global economy.
Despite this, global equity returns were positive for the quarter. As in previous quarters, US shares led the way, with S&P 500 hitting another record high, thanks in large part to the big tech companies that continue to dominate. Japanese stocks were also positive, but Europe and the UK saw a more challenging period, ending the quarter slightly down.
At year-end, all developed markets were positive for the previous 12 months, with an especially strong showing of over 20% for the S&P 500 index of American shares.
Global fixed income markets struggled over the quarter as inflation expectations hardened. Government bonds in particular experienced a significant sell off at the end of the year that continued into 2025.
An improving economic backdrop supported high yield bonds, which outperformed. High yield bonds offer a higher interest rate than other bonds because the issuing company is considered to have a higher risk of not paying the bond back; a stronger economy reduces the chances of default making the higher interest rate more attractive, and this boosted returns.
Over the year as a whole, bonds suffered as the inflation and interest rate picture changed. In January 2024, investors expected central bank interest rates to fall quickly. As inflation proved more stubborn than anticipated, and central banks held on to higher rates, bonds became less attractive.
Outlook
As we head in to 2025, a recurring investor concern is the high price of US shares. Share prices typically reflect investors’ views on how well a company will do in the future, given what they know at the time. New information can lead to sudden shifts as investors re-evaluate a company’s likely opportunities. Investors have done well as prices have risen, but these sorts of sharp rises can lead to anxiety about a sudden reversal.
The election of Donald Trump as President of the US is one factor that could lead to a change in mood. His declared intentions around tariffs are one area in particular that could have a substantial impact on global trade and the global economy, which could lead to a rerating for equity markets. Whether he follows through on his rhetoric is yet to be seen.
A change in central bank policy could also cause a turn in sentiment. Heading into 2025, inflation looks more stubborn than it did at the same time last year, and the expectation is that central banks will be slower to reduce rates than was expected 12 months ago. However, if the global economic outlook began to get worse central banks could shift gears and lower rates more quickly to stimulate economic growth.
As ever, it is important to bear in mind the old investing adage that time in the market beats timing the market. Understanding short-term trends can help to provide minor uplifts along the way, but the path to successful investing comes from identifying companies that have the capacity to benefit from long-term sectoral trends. This is at the core of AXA IM’s investment approach and will continue to drive our investment strategies in the future.
Helpful information to help you understand your investments.
Investing in bonds
A bond is like a loan that pays regular interest and a final lump sum.
Investing in a fund
A fund is an easy way to invest in a diverse portfolio of different assets.
Log in to our online portal
Find out how much your investment is worth and how your fund is performing.
Got a question?
Our frequently asked questions provide you with more information on key topics.
Disclaimer
Past performance is not a reliable indicator of future results. The value of investments may fall as well as rise and you may not get back the full amount invested.
This document is for informational purposes only and does not constitute investment research or financial analysis relating to transactions in financial instruments as per MIF Directive (2014/65/EU), nor does it constitute on the part of AXA Investment Managers or its affiliated companies an offer to buy or sell any investments, products or services, and should not be considered as solicitation or investment, legal or tax advice, a recommendation for an investment strategy or a personalized recommendation to buy or sell securities.
Due to its simplification, this document is partial and opinions, estimates and forecasts herein are subjective and subject to change without notice. There is no guarantee forecasts made will come to pass. Data, figures, declarations, analysis, predictions and other information in this document is provided based on our state of knowledge at the time of creation of this document. Whilst every care is taken, no representation or warranty (including liability towards third parties), express or implied, is made as to the accuracy, reliability or completeness of the information contained herein. Reliance upon information in this material is at the sole discretion of the recipient. This material does not contain sufficient information to support an investment decision.
Issued in the UK by AXA Investment Managers UK Limited, which is authorised and regulated by the Financial Conduct Authority in the UK. Registered in England and Wales No: 01431068. Registered Office: 22 Bishopsgate London EC2N 4BQ
In other jurisdictions, this document is issued by AXA Investment Managers SA’s affiliates in those countries.
Risk Warning
The value of investments, and the income from them, can fall as well as rise and investors may not get back the amount originally invested.