Volkswacht Bodensee - Global markets rode AI, interest rate roller coaster in 2024

Here are four of the most remarkable aspects of 2024 on financial markets:

- Stock records fall like dominoes -

Wall Street's three main stock indices blew past record highs to set new peaks in 2024, with the Dow Jones Industrial Average climbing above 45,000 points, the S&P 500 above 6,000 and the Nasdaq Composite above 20,000.

"It was an exceptional year, driven by the performance of tech shares thanks to artificial intelligence," said Christopher Dembik, senior investment advisor at Pictet Asset Management.

The Dow was set to end the year up by around 13 percent, while the S&P 500 and the Nasdaq, which have more tech stocks, were set to notch annual gains of nearly 24 percent and 30 percent respectively.

Shares in Nvidia, which makes processors particularly prized to run AI models including applications such as ChatGPT, were on track to rise more than 175 percent in 2024.

"It’s now been about two years that ChatGPT was launched and it’s been two years that the AI buzz pushed some US Big Tech companies to the sky," said Ipek Ozkardeskaya, senior analyst at Swissquote Bank.

"Nvidia, which has become the icon of the AI rally, gained almost 1000 percent since then, the Magnificent Seven nearly 100 percent since last November," she added.

The Magnificent Seven are seven companies widely recognized for their technological and consumer impact: Alphabet (Google), Amazon, Apple, Meta (Facebook), Microsoft, Nvidia and Tesla.

In Europe, records also fell, but the gains were less marked.

Frankfurt's DAX, driven by business software developer SAP (+70%) broke the 20,000-point level and finished the year with a gain of 18.9 percent.

Tokyo's Nikkei 225 index gained almost 20 percent in 2024, finally surpassing the high seen before Japan's asset bubble burst in the 1990s.

- A very political year -

Donald Trump's victory in the US presidential election gave Wall Street even more of a boost on hopes he will follow through on pledges of deregulation and tax cuts.

"The market considered that will mean more growth and for longer," said Pierre Bismuth, director at Myria Asset Management.

Politics was not always the friend of investors, however. Look at France. President Emmanuel Macron calling early parliamentary elections backfired with no clear winner, and the Paris CAC 40, which had been up more than six percent ahead of the election, ended 2024 down more than two percent.

Weakness in China further dragged down luxury stocks.

In 2025, investors are keeping a wary eye to see if Donald Trump implements threatened tariff hikes, as well as the outcome of early elections in Germany in February.

- Bitcoin, gold and commodities -

Bitcoin rode expectations of deregulation under Trump to break the $100,000 level and rose more than 120 percent. Ethereum rose more than 40 percent, even if it did not set a new all-time record.

Gold also set a new record as it benefitted from its safe-haven appeal during times of geopolitical tensions.

Commodities such as coffee and cocoa set new records as poor weather caused supply concerns.

- Monetary policy roller coaster -

The central banks of major Western nations finally began to cut interest rates they had hiked to tame an inflation spike triggered by the post-pandemic recovery and the Russian invasion of Ukraine.

Switzerland got the ball rolling in March, followed by the European Central Bank in June and the Bank of England and the US Federal Reserve in September.

Investors as well as central banks were anxious about the pace of interest rate cuts: Not too fast to reignite inflation but not so slow activity falls.

Trading sometimes turned volatile as investors interpreted economic data in the prism of its impact on the Fed's likelihood to cut rates.

In August investors took fright from disappointing US jobs figures, causing a nearly three percent slump on Wall Street as they feared the economy might be on the brink of a recession.

However, the US economy proved resilient and investors and the Fed have been paring back their expectations of further rate cuts, especially as Trump's tariffs could spark fresh inflationary pressures.

Given stagnant growth in the eurozone, the ECB is expected to continue cutting rates.

G.Haefliger--VB