In 2024, too, there were once again a number of developments in the economy and on the markets that could not have been foreseen. And that, in the outlooks for the year, had largely been expected to turn out differently. Things that many market experts had not counted on.
1) Interest rate cut with a delay
In anticipation of possible interest rate cuts, share prices on Wall Street already rose sharply at the end of 2023. Around the turn of the year, many were certain that the Fed would cut its key rate in March for the first time in four years. But it then took until September. The reason: "Inflation proved far more stubborn than expected," explains Philipp Dobbert, Chief Economist at Quirin Privatbank and at quirion. And whether inflation is now "under control" remains to be seen. In October and November, it edged up slightly once again.
2) The "unbreakable" US economy
In the world's most significant equity market, every piece of economic data was once again scrutinized down to the last detail this year. The question constantly hung in the air of whether there were any signs of an impending recession. "When you hit the brakes as hard with rate hikes as the Fed has, brake marks should really become visible in the economy," notes economist Dobbert. It borders on a miracle, he says, how robust the US economy has proved to be so far.
The picture in Germany is quite different: economic sentiment has not been rosy for some time now. But after an already weak 2023, there had been hopes of some recovery. Instead, economists had to revise their forecasts downward one after another. For example, whereas leading German economic research institutes had still forecast growth of 1.3 percent for 2024 in their joint assessment in the autumn of 2023, a year later that expectation had shrunk to a decline of 0.3 percent.
3) "Boom & bust" in Japan
Still at 33,464 points at the end of 2023, the Nikkei 225 reached an all-time high in March for the first time in 34 years. And in July it climbed to over 42,400 points at one point. In August a sharp slump followed, in connection with the unwinding of special speculative trades. But the correction was only short-lived.
"This shows that with individual equity markets it can take quite a while before they get back to old record highs — one of many reasons that speak in favor of a broadly diversified world portfolio," Dobbert emphasizes. "With a world portfolio and a long-term investment horizon, you also don't need to worry when sharper corrections occur here and there."
4) Shifts in political majorities
Politically, too, 2024 held some surprises. Only late and only temporarily did Kamala Harris become the Democrats' candidate of hope in the US presidential election. In the end, election winner Donald Trump will now not only be the next US president. The Republicans also secured the majority in both the Senate and the House of Representatives. That, at least, was something few had likely expected. The markets initially welcomed the election result with price gains.
There had already been speculation for some time in the run-up about the collapse of the "traffic light" coalition in Germany. When it happened, though, it came fairly abruptly. The markets initially showed no notable reaction. That reaction was more pronounced in the face of the government crisis in France. Risk premiums on French government bonds rose sharply. Surprise parliamentary elections in the summer, then difficulties in forming a government, and in December the resignation of Prime Minister Michel Barnier yet again — France faces major challenges. Its national debt is high, and new borrowing is breaching the upper limit set by the EU.
5) Yet another outstanding year for equities
After an above-average performance, more than a few people looked skeptically at the coming stock-market year at the end of 2023. But anyone who followed the skeptics and stayed away from the equity market missed out on a lot. Time and again, major stock indices reached new records in 2024, led above all by the S&P 500.
Two outstanding years in a row: is that now a bad omen for 2025? "Prices have no memory," explains Dobbert. Of course performance cannot be above average in every single year. "But the way the past two years played out says nothing about how things will develop in 2025." There will certainly be a few surprises, too. "When investing, you should count on that and never rely on forecasts," Dobbert stresses. "With a broadly diversified world portfolio, you don't even have to get involved in speculation in the first place."
