December saw take profits after a stunning 11 month performance, the first 2 days in 2025 are showing renewed risk taking
WEEKLY TRENDS
Last 2 trading days of 2024 saw a series of take profits in Equities and rates slightly down, while the first 2 trading days of 2025 saw the exact opposite except for China Equities. The USD remained stronger, so did BTC, Oil and Gold
As for the year 2024, risky assets were clearly the winners with Equities and Private Equities, together with reserves diversification assets like BTC and Gold. Bonds suffered, especially long dated government debts. Hedge funds on average disappointed (in comparison to other risky assets). Performances were concentrated as they were in 2023 (Mag7 were up 65%)
Global valuations are near their highest levels but Tech P/E ratios are still half of the peak seen during the Dot-com bubble
2025 challenges will be placed in the EU with Italy and France (exceeding the EU’s 3% of GDP rule by nearly double), China and Germany’s economic rebound, and the $36trn US debts
MARKETS
Equities
2024:
Biggest winners were Palantir (+340%), Vistra (+260%), Nvidia (+170%). Mag 7 represented more than half of the SP500 gains (IT +43%, Financials +15%, Communications +13%, Cons Disc +11%, Industrials +6%)
2025:
Wall Street’s analysts plan on a 10% rise for benchmark stock indices. Mag 7 EPS growth expected at 21% (other 493 stocks at +13%)
Bonds
2024:
USD bonds aggregate -4% (20yr UST -8%, HY +8%), EUR -1.2% (HY +8.5%) and EM at -2%
2025:
Analysts plan further US curve steepening (2yr yield lower than 10yr)
Commodities
Oil price (+3% due to the current Artic cold wave)
Note that European Gas (Dutch TTF) broke the EUR 50 bar following the cut off for Russian gas transit via Ukraine
US
Yellen said on Dec 27, the US will hit their debt ceiling mid-January. The Fed reduced its balance sheet (-10.5% in 2024). US Treasury’s annual interest expense was $1.12trn (2nd largest after social security)
Crypto
BTC was the clear winner in 2024, still in positive territory during the first 2 days of 2025. Note that in the EU, the new regulation on crypto assets (MICA) took place on Jan 1st
Nota Bene
IPOs in 2024 (-4% YoY in volumes at $120bn) US share is up 45% reaching $33bn (20 companies raised more $500m vs 7 in 2023), EU up 40% with $19bn but Asia is down -30% (incl. China -65%)
China’s property market had a $18trn loss over the past 3 years
CALENDAR
Macro data releases:US last FOMC minutes (8 Jan), Dec Job report (10 Jan); FOMC / FED (29 Jan); ECB (30 Jan)
US Markets close: Carter's day of mourning (9 Jan)
WHAT ANALYSTS SAY
UBS Wealth Management - December 2024: Month, quarter and year in review; Global forecasts
UBS Wealth Management, 2 Jan 2025 - December in review
Authors: Christopher Swann, Strategist ; William Choo and Matthew Carter, Strategists
· Global and US equities both declined in December, following market disappointment over the Federal Reserve's likelihood of slowing the pace of rate cuts in 2025. This also appeared to contribute to a weak end to 2024 for high quality fixed income and gold.
· That said, for 2024 overall, global stocks returned 20.7%, led by US market strength. The S&P 500 returned 25%, the second year in which the index advanced more than 20%. The 2024 rally was driven by a combination of rate cuts by top central banks, the continued strength of the US economy, and optimism over the commercialization of AI.
· Despite a possible moderation of US rate cuts in 2025, we still expect a positive backdrop for equities as earnings growth broadens and further progress is made toward monetizing AI. In fixed income, we continue to believe that high grade and investment grade bonds, diversified fixed income, and equity income strategies are valuable in a portfolio context.
In US equities, notwithstanding fewer likely rate cuts, we see a favorable backdrop ahead—driven by a mixture of lower borrowing costs, resilient US activity, a broadening of US earnings growth, further AI monetization, and the potential for greater capital market activity under a second Trump administration. We expect the S&P 500 to hit 6,600 by end-2025 and see scope for underallocated investors to use any near-term turbulence to add to US stocks, including through structured strategies.
In foreign exchange markets, we continue to advocate that investors should sell further dollar strength. Shifting expectations for Fed and US government policy have supported the US dollar in the weeks since we published the Year Ahead, and we continue to believe its valuation is stretched. While we do not expect significant nearterm weakness, we think that investors should use further strength in the dollar to diversify into other preferred currencies, including the British pound and Australian dollar.
In commodity markets, if the Fed only delivers two rate cuts in 2025, we would likely need to moderate our expectations for gold demand from exchange-traded funds (ETFs), which could reduce the further gains we still expect in bullion prices. However, we note that gold prices have risen materially over recent years despite a strong USD and higher US interest rates—in part due to central bank reserve diversification and in part due to investor demand for hedges. We believe these trends will continue as political and geopolitical uncertainties persist and should support the continued strong demand for gold.
In fixed income, we continue to believe that high grade and investment grade bonds, diversified fixed income, and equity income strategies are valuable in a portfolio context. Although our base case no longer expects materially lower USD or CHF interest rates in 2025, we see absolute fixed income yields as appealing and believe that investors should consider diverse sources of income, since cash rates could still fall sharply if there are surprise weaknesses in economic data. Overall, while positioning for lower rates may no longer be as urgent, putting cash to work and seeking durable income should remain a strategic priority for investors.
UBS Wealth Management, 2 Jan 2025 - Global forecasts
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