2024 was another stellar year for asset returns, as central banks began to aggressively cut rates even though inflation proved stickier than expected and economic growth was solid. That meant the S&P 500 posted a total return of +25%, marking the first time since the Clinton presidency where it’s achieved back-to-back annual returns above 20%. The index was powered by further gains for the Magnificent 7, which were up +67%, and other risk assets did very well too. Indeed, credit spreads tightened to all time tights, while Bitcoin more than doubled. Moreover, the US exceptionalism narrative helped push the US Dollar to its strongest annual close since 2001.
Yet despite the generally upbeat performance, there were plenty of bumps along the way as DB's Jim Reid writes in his year in review note (available to pro subscribers in the usual place). Rate cuts took longer than many expected, meaning that sovereign bonds struggled to gain traction. In fact, the 10yr Treasury yield rose for a 4th consecutive year, which is the first time that’s happened since the 1980s. Political developments also caused several wobbles, particularly around April as tensions in the Middle East escalated. Over in France, the country’s assets underperformed amidst the political uncertainty. And there was huge (albeit brief) market turmoil in the summer, as weak US data and a BoJ rate hike led to the unwinding of the yen carry trade. So with quite a few concerns still in the background, gold prices posted their strongest annual gain since 2010.
