The year 2024 comes to a close as one marked by complex challenges and diverse dynamics, testing the resilience of global financial markets and the adaptability of economic operators. In an environment of growing uncertainty, investors have had to constantly recalibrate their strategies to navigate often conflicting economic, political, and social forces.
Central banks have played a crucial role, while geopolitical factors—such as the ongoing war in Ukraine, tensions in the Middle East, and Donald Trump’s return to the U.S. presidency—have added further uncertainty, increasing the risk of renewed protectionist policies. However, certain assets and sectors have outperformed: U.S. and European stock indices reached all-time highs, while the technology and artificial intelligence sectors drove profits for several U.S. companies. Meanwhile, countries like India attracted capital thanks to strong economic growth and favorable demographics. Lastly, the U.S. dollar strengthened, supported by Trump’s victory and the expectation of a slowdown in the Federal Reserve’s rate-cutting cycle.
Financial Markets in December
In December, markets continued to navigate a volatile environment. Wall Street initially hit new all-time highs before retreating in the final days of the month, closing in negative territory: the S&P 500 lost -2.70%, while the Nasdaq remained slightly positive at +0.40%. In contrast, European markets showed greater resilience, with the Euro Stoxx 50 up 1% and the FTSE MIB gaining 2.20%, while the DAX remained almost flat at -0.10%. The Swiss market, however, underperformed, with the SMI down -1.90%. Asian markets posted stronger performances, with the Nikkei rising by +3.60%, followed by the Hang Seng at +2.50% and the CSI 300 at +1.30%.
On the fixed-income front, bond yields declined throughout the month, making long-term securities more attractive given a more favorable risk/reward profile. In this scenario, we prefer Investment Grade bonds over high-yield securities, as credit risk spreads have narrowed excessively.
Monetary Policies and Macroeconomic Landscape
The year 2024 was marked by diverging monetary policies and a gradual market adjustment to new macroeconomic conditions. In the United States, the Federal Reserve ended the year with a third consecutive rate cut, bringing the benchmark rate down to 4.50%. However, the Fed signaled a slowdown in its easing cycle, now projecting total cuts of just 50 basis points in 2025—half of the 100 basis points initially anticipated.
In Europe, the European Central Bank took a cautious stance, leaving rates unchanged in December. This decision reflects persistent uncertainty related to inflation and weak economic growth, particularly in France and Germany, where structural and political challenges continue to weigh on the outlook. In Italy, despite a challenging environment, investor confidence remained strong, as evidenced by the high demand for government bonds in the year-end auction, signaling trust in the country’s sovereign debt stability.
2025 Outlook: Opportunities and Risks
The 2025 stock market outlook remains broadly positive, with expected gains across all major regions, albeit likely at a slower pace than in 2024. One key reason for optimism is declining interest rates, which support higher equity valuations. At the same time, lower rates reduce the appeal of bonds, bringing dividend-paying stocks back into focus. While riskier than fixed-income investments, these stocks provide a steady income stream.
Switzerland stands out as an attractive market in this context, boasting a high number of globally leading companies that distribute substantial dividends. The defensive nature of the Swiss stock market is evident in sectors such as pharmaceuticals (which has a significant weighting in the benchmark index), as well as food and insurance industries.
The U.S. stock market, however, remains a key uncertainty. The policies announced by the Trump 2.0 administration present a mixed picture—offering economic stimulus through tax cuts while potentially fueling inflation through tariffs and immigration policies. In the short term, the positive aspects may provide some momentum, which is why we maintain a positive short-term positioning for now.
In contrast, investors should approach Europe with greater caution. Political instability in Germany and France weighs on market sentiment, while the industrial sector remains under pressure with no clear signs of recovery.
Emerging markets, particularly those dominated by China, also warrant prudence. The Chinese real estate crisis remains unresolved, and the central bank’s measures to support economic growth have so far proven insufficient. This ongoing uncertainty is reflected in weak consumer spending, and a turnaround in this trend is necessary for a broader economic recovery. Until then, a cautious approach is advisable.