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Thriving through uncertainty - 2024 in review

Thriving through uncertainty - 2024 in review

Despite the unpredictable events of 2024, we witnessed incredible resilience and growth in investment markets. Even with occasional ups and downs, investors navigated these extraordinary times with determination.

While economic growth both in Australia and across the globe fell short of expectations, the share markets rode out the ups and downs to finish 2024 strongly. It’s a testament to how we can adapt and thrive even when faced with challenges.

2024 was the ‘super election year’, with almost 2.5 billion people in 70 countries voting. One result that captured the attention of governments and analysts around the world is Donald Trump’s return to office in the United States. Trump has promised massive tariffs, tax cuts and increased spending on defence. All measures are likely to increase inflation and budget deficits which will affect global markets and economies.

The year was marked by significant geopolitical changes that has affected us all. Despite the challenges in the Middle East, there was a strong sense of unity as nations worked towards solutions.

The US dollar ended the year on a two-year high but that, and a weakening Chinese Yuan, led to a two-year low for the Australian dollar, which ended the year just below 62 US cents.

Cost of living falls but interest rates steady

Around the world, interest rates fell during the year but in Australia, after five interest rate increases in 2023, the Reserve Bank (RBA) held steady at 4.35 per cent, believing inflation is still too high.

Nonetheless, the cost of living has fallen significantly, down to 2.8 per cent in the September quarter from a high of 7.8 per cent two years ago and 3.8 per cent in the June quarter.

Falls in electricity and petrol prices contributed to the easing.

Australia’s economy grew by 0.8 per cent in the three quarters to the end of September – it’s slowest in decades.

House prices mixed across the country

The Australian housing market appeared to cool by the end of the year with average national home values falling by 0.1 per cent in December to a median of $815,000.

Corelogic’s Home Value Index data shows five of the eight Australian capitals recording a decline in values between July and December. These included Melbourne, Sydney, Hobart and the ACT. While in Perth, Brisbane, Adelaide and Darwin, home values increased.

Share markets survive and prosper

Despite the stormy economic and political conditions in 2024, global share markets were unsinkable.

The Nasdaq surged over an impressive30 per cent for the year, while the S&P 500 was up 25 per cent – pushed along by the ‘magnificent seven’ tech stocks.The Dow also celebrated a strong year, rising 14 per cent.

Although not quite in the same league, the ASX performed strongly, recording 24 new record highs during 2024. The S&P/ASX 200 closed the year at 8159, up 7.5 per cent, with some analysts predicting 2025 will close around 8800.

Commodities

Gold has emerged as a go-to safe haven for those concerned about global events, reaching an all-time high in October and adding more than 28 per cent for the year.

On the other hand, oil prices remained steady with investors cautious over a potential oversupply, ongoing conflicts in the Middle East, the war in Ukraine and political changes in the US. However, there is some optimism for improved growth in China in 2025.

Meanwhile, iron ore prices have continued to decline, now down to about half of the peak US$200 a tonne in 2021. It’s essential to keep an eye on these fluctuations if you’re monitoring the market.

Looking ahead

Economist forecasts vary on the timing of a cut in interest rates in 2025 but some believe there will be as many as four cuts, reducing the rate to 3.35 per cent by year end.

Share price volatility is expected to continue as investors roll with the global political and economic punches and the upcoming Australian Federal Election is likely to introduce uncertainty until the results are in.

Next steps

If you would like some assistance to review your goals for 2025 in light of recent and expected developments, contact your local Nexia adviser.

Note: all share market figures are live prices as at 31 December 2023 and 2024 sourced from: https://tradingeconomics.com/stocks.

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