Global markets rode AI, interest rate roller coaster in 2024
NEW YORK
Traders work on the floor of the New York Stock Exchange (NYSE) on the last day of trading for the year on Dec. 31, 2024 in New York City.
Despite political upheavals, stock markets and bitcoin smashed records in 2024, fuelled by investor enthusiasm for Artificial Intelligence (AI), falling interest rates, and hopes of tax cuts.
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 ended the year up by around 13 percent, while the S&P 500 and the Nasdaq, which have more tech stocks, notched annual gains of over 23 percent and around 29 percent respectively.
Shares in Nvidia, which makes processors particularly adept at running AI models, including applications such as ChatGPT, rose more than 170 percent in 2024.
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 percent) 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.
Donald Trump's victory in the U.S. 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.
In 2025, investors are keeping a wary eye to see if Trump implements threatened tariff hikes, as well as the outcome of early elections in Germany in February.
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.
The central banks of the United States and some European countries 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.
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 that activity falls.
However, the U.S. economy proved resilient and investors and the Fed have been paring back 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.
