Investors are bringing the current year to a happy end after the American stock market once again rejected a strong return, while at the same time gold recorded an excellent performance, similar to the year before the pandemic.
The year was marked by numerous geopolitical conflicts and crises, the slowdown of inflation and the beginning of the cycle of interest rate cuts, as well as the American elections that took place in a democratic atmosphere with Trump’s return to the White House.
Oil and bonds at rock bottom, good year for stocks – Neither the series of conflicts in the Middle East nor the continuation of the war in Ukraine could trace the path of the rise in the price of crude oil in the conditions of weaker Chinese demand and the fluctuating economy of the Eurozone.
Among the main investment classes, US bonds with a higher credit rating also suffered a negative effect after seeing a rise in yields (fall in price) in the last few months despite the fact that the Fed has started to cut interest rates, reports Bankar me. The environment of higher yields on bonds was contributed by the solid growth of the US economy, the expected increased budget deficits, but also the uncertainty regarding inflation in the new Trump mandate.
Gold led the gainers among the major investment asset classes amid extremely high geopolitical tensions and still simmering inflation.
US stocks in the S&P 500 index jumped more than 20 percent for the second year in a row, and on a global level they were competed by Japanese stocks, largely supported by the weakening of the yen. European shares, as measured by the STOXX50 index, rose by only about eight percent, while despite the weak situation in the German economy, the DAX led the national European markets with a growth of about 19 percent.
The year in which the trading of ETFs on bitcoin began was also marked by this cryptocurrency, which carries a yield in 2024 of about 110 percent.
S&P 500 – Another Year of 20+ Percent Returns – In mid-January, the S&P 500 posted its first record high in more than two years only to return around 25 percent by the end of December, marginally better than the fantastic performance of the previous year.
A major contribution to the growth of this index was once again made by the largest technology companies, and the seven largest accounted for more than a third of this index basket in an increasingly concentrated market.
A big contribution to the growth of the index was made by the end of the American elections – firstly, because they were held in a democratic atmosphere without contesting the defeated party, and then because investors quickly began to consider the affirmative parts of Trump’s policy, such as deregulation and lower taxes.
Observed by sector, technology companies were the main carriers of the index’s growth (communication services and the technology sector), but the discretionary goods and services and finance sectors also made a big contribution, especially in light of the expected deregulation of the new US administration.
The energy, health care and materials sectors stood on the opposite side and brought marginal returns in the current year.
Corporate profit growth lags behind the market – After US corporations started to see profit growth in the second half of 2023, growth expectations for 2024 stood at low double-digit rates.
As in the previous period, this optimistic scenario was not realized, so expectations were pushed into the future, and two excellent business years are now expected (profit growth of 14 percent each) compared to the 10-year average of around eight percent.
This year’s profit growth was led by technology companies, and their good performance is expected in the next year as well, with a somewhat worse than expected profit growth rate of close to 20 percent in 2024.
Analysts currently expect that the large recovery of corporate profits will be more evenly distributed across sectors, so after a long time, companies from the index, apart from the technology sector, could bring a double-digit growth rate of the bottom line.
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