The table below provides our usual year-to-date summary of the major indices we look at. It is clear to see that the general direction of travel last year was positive for Equities, with Fixed Income indices selling off slightly as markets realised that interest rates were likely to remain higher for longer, something we’ve been preaching for the last 12 months.

Source: Financial Analytics

The chart below, however, shows the journey each of the indices took, in that 2024 was still a rather volatile year, with much of the return coming about in the last few months of the year, just like in 2023.

Source: Financial Analytics

The year started with optimism in equity markets, the end of 2023 had seen a strong rally and that continued. With interest rates seemingly at their peak, and likely to come down further, the market was full of confidence. The bond market however had already become too excited at the tail end of 2023, which set the tone for the remainder of 2024, seeing very little positive return from duration.

Oil was the biggest gainer in the first 4 months of the year, peaking in mid-April amidst ongoing geopolitical issues in the Middle East. The Saudi’s then decided to increase production, to sell their oil at any price, rather than giving away too much market share.

You could say the period from April to September was uneventful, with most markets moving sideways other than the strong spike in volatility in early August, led by, or coinciding with the Japanese carry trade.

By that point, in the UK, we’d already had a General Election, but the outcome of that was not unexpected. Nothing would become clear until the budget later in the year, with many different options put forward before anything was cemented in place.

The budget in the UK then came to pass, and for a day at least markets seemed to be fairly unconcerned by the news, with both bonds and equities moving very little. It soon became clear that the budget alone could not fuel the borrowing required, and that the UK Government would have to take on more debt. This saw the UK bond market fall and confidence in the UK as a whole diminish.

To make matters worse, just a short time later, the US elections took place and Donald Trump won a second, non-consecutive, term in office. Leaving any personal views aside, this was seen to be very positive for US equities, and pretty much bad news for China and anyone else who wanted to sell to the US. Even the UK was seen to be at threat, with Trump requesting we increase our purchases of US Natural Gas (despite already being their largest exporter) and any trade deal potentially hampered by news that Labour had ‘encouraged’ some of their members to help canvass for Kamala Harris. Trump does not forget those who go against him easily.

This saw the US as a whole rally strongly towards the end of the year, as protectionism took hold, with a slight wobble in the last few weeks. This was still the first time in decades that the US markets had two consecutive years of over 20% growth.

So, what does this mean for multi-asset portfolios? 2024 was effectively driven by an investors US exposure. If you were overweight to the US, particularly some of the mega cap names, you most likely did very well, unless you had been too early to increase duration in bonds.

Other equity regions provided diversification, but nowhere near the level of returns and some areas such as UK small/mid cap had a particularly tough year, as did Europe as a whole. That last point is mainly down to the constituents in their indices being consumer driven, and the slowdown in China has seen companies like L’Oreal and LVMH suffer, as well as many of the German car manufacturers.

We still believe that the market will broaden out and have increased our exposure away from the mega caps for 2025. We do have concerns over the long-term prospects for both the UK and Europe, which is driving investors towards the US in even greater numbers, so diversification of market cap, sector and even theme within the US will be key.

Please note that we do not provide advice on individual stocks, the data contained within this document is for information purposes only and does not constitute advice. It has been prepared to demonstrate the challenges faced in the market in the present climate.

Past performance is not a guide to future performance and may not be repeated. The value of investments and the income from them may go down as well as up. Investors may not get back any of the amount originally invested.