Forecasting Market Trends
US shares
The S&P 500 (^GSPC 0.53%) surged over 20% in 2024. It was the biggest year in a decade. The upside was powered by a strong economy, the changing of the guard in the White House, and the interest cut by the Federal Reserve. The large-caps and the magnificent tech stocks led the charge. outperforming the mid and smaller cap shares.
Australian Shares
The S&P/ASX 200 (ASX: XJO) was a solid performer in 2024 with a late pull back in December. It was above the 10% per annum average, but not even close to the US markets performance.
Which investors were the winners in 2024
Investors that had a diversified portfolio including bonds, and international exposure were the general winners for last year.
US Dollar Strength
The US dollar has strengthened greatly against the AU Dollar, pushing it to a 2 year low of 0.6200. This was sparked by the Federal Reservice interest rate cut. While it has recovered ever so slightly, economists are not expecting much of a price increase in the short term as Trump’s tariffs are expected to strengthen the USD and possibly even push the AUD down halfway to the 5 year low.
2025 What does the future hold?
January 2025
Trillions wiped off the market by Deep Seek, and now Alibaba unveils its language model Qwen 2.5.
$1 trillion has been wiped off the US Markets as of 29th Jan, with NVIDIA the biggest loser plunging over 16% and $589 billion wiped from its market cap with news that China-based ‘Deep Seek’ outperforms OpenAI’s ChatGPT in several tests. The contamination spread to other Tech stocks namely Microsoft (2% drop) and Alphabet (4% drop).
2025 Long term
We should begin with the International Monetary Fund (IMF) Forecasts for 2025 and 2026. The IMF has predicted that global growth is expected to remain stable yet underwhelming.
“Global growth is projected at 3.3 percent both in 2025 and 2026, below the historical (2000–19) average of 3.7 percent. The forecast for 2025 is broadly unchanged from that in the October 2024 World Economic Outlook (WEO), primarily on account of an upward revision in the United States offsetting downward revisions in other major economies.”
Trump back in the White House
The US market has responded favourably while the rest of the world has some concerns and disappointment as the next four years may bring a roller-coaster of a ride.
President Trump is at times unpredictable and erratic. Policy uncertainty is also unpredictable which can have a profound effect on the markets. I still vividly recall a single Trump Tweet, 1st of August 2019, that wiped over 600 points off the S&P 500 within minutes.
Trade Wars
Watch this space as Trump’s tactics on trade wars could be more about threatening tariffs, with the intent perhaps to reach a more practical compromise. E.g. Other countries to do more on narcotic imports or slow the flow of illegal immigrants across US borders.
Written by,
Alastair Kennelly
References:
IMF WEO October 2024 – https://www.imf.org/en/Publications/WEO/Issues/2024/10/22/world-economic-outlook-october-2024
IMF WEO January 2024 – https://www.ato.gov.au/media-centre/wash-sales-the-ato-is-cleaning-up-dirty-laundry
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The information provided is of general nature only and does not take into account your personal objectives, financial situations or needs. Before acting on any information provided, you should consider whether the information is suitable for you and your personal circumstances and if necessary, seek appropriate professional advice. All opinions, conclusions, forecasts or recommendations are reasonably held at the time of compilation but are subject to change without notice. Investments can go up and down. Past performance is not necessarily indicative of future performance.
