Just like 2023, 2024 was another good year for risk assets globally – in fact it was even better. The MSCI ACWI index returned 20% over the year, coming off the back of a 15% rise in 2023. This was achieved despite interest rates not falling as far as the markets initially hoped and expected, as well as wars in Ukraine and the Middle East and many elections across the globe.
US large cap equity continued to lead the way across the whole of 2024 as the S&P 500 returned more than 20% over a calendar year for the second year running. This has only happened on 4 previous occasions since 1900. Despite a brief renaissance in the middle of 2024, small cap stocks continued to lag their large cap peers and investors who have put their faith in the small cap premium will hope this eventually comes good in 2025.
Emerging Markets continued to lag developed markets through 2024. Emerging Markets are inherently seen as more risky than developed markets, they have less regulation, more political risk and alleged corruption. On the flip side, at least in theory they should have higher growth potential. Investors in these areas have not seen this materialise and, as with small caps, will be hoping this trend reverses in 2025.
Short dated bonds did what they were supposed to do – provide a solid and unspectacular return with little volatility. There are lots of people that like to overcomplicate investing but the simplest portfolio is often the best. At Altor we believe the vast majority of investors only need to invest as much as possible in equities for long term money (dependent on risk profile) and short dated bonds for money that might be needed in the short-mid term, all at the lowest cost possible.
As we wrote last year, around this time of year is when lots of analysts will come out with their prediction as to what will happen in investment markets over the next year (in case you were wondering, they were just as wrong about 2024 as they were about 2023). As with most things in investing, you will save yourself some time, and be much better off, by completely ignoring and forgetting about all of this and better focusing your time and energy on something you truly want to be doing.