Global Equities Brace for New Policies in 2025

The outlook for 2025 presents a nuanced picture. While headwinds such as potential policy shifts around tariffs, taxation, and interest rates pose challenges, the factors that fueled 2024’s success— healthy economic growth, robust corporate earnings, and a Federal Reserve steadily normalising its monetary policy - remain in play. 

The year 2024 may have concluded on a subdued note, but for investors, it was a period of remarkable achievements. The S&P 500 shattered records, hitting 57 all-time highs, and delivered over 20 per cent returns for a second consecutive year—a feat last achieved in 1998. This performance was not solely driven by mega-cap technology stocks, though they led the charge. Gains extended across a variety of sectors, investment styles, and market capitalisations, underscoring the breadth of the market rally. 

We believe that in 2025, the stage is set for both global equities and bonds to extend their upward trajectory. Key drivers include:
1. Economic Resilience - Projections suggest another year of steady economic expansion, underpinned by strong consumer spending and robust business investment.
2. Corporate Profit Growth - Companies are expected to continue reporting solid earnings, driven by operational efficiencies and strong demand across various sectors.
3. Monetary Policy Stability - With inflation showing signs of cooling, the Federal Reserve is likely to maintain a balanced approach, fostering favourable conditions for both equity and fixed-income markets. 

The labour market closed the year on a high note, providing further evidence of economic resilience. Initial jobless claims dropped to 2,11,000 for the week ending December 28, marking the lowest level in eight months. Continuing claims also fell to 1.84 million, a three-month low. These figures highlight the sustained strength of the U.S. job market and its role in underpinning consumer confidence and spending. 

Global Market Highlights
Europe: Resilience Amid Mixed Performances
European markets reflected a mixed sentiment as 2024 ended. The pan-European STOXX Europe 600 Index edged up 0.20 per cent, aided by thin trading volumes and minimal news flow. 

• UK’s FTSE 100 stood out with a 0.91 per cent gain, supported by a weaker British pound. The depreciation of the pound enhanced the competitiveness of multinational companies listed on the index. 
  
  
   
• Germany’s DAX declined 0.39 per cent, while France’s CAC 40 and Italy’s FTSE MIB posted losses of 0.99 per cent and modest declines, respectively. 
   

Japan: Record Highs and Strategic Reforms
Japanese stock markets experienced a holiday-shortened fortnight but concluded the year at a historic high. The Nikkei 225 Index ended 2024 at 39,894.54 - its highest year-end closing level - posting a remarkable 20 per cent annual gain. This growth was driven by:

• Corporate Governance Reforms: Initiatives aimed at enhancing shareholder value.
• Share Buybacks: A trend among Japanese corporations returning capital to investors.
• Currency Dynamics: A weaker yen bolstered exporters, making Japanese goods more competitive globally. 
   

Meanwhile, in the past fortnight, the TOPIX Index recorded a 17.6 per cent annual gain. However, the yen depreciated nearly 11 per cent over the year, raising concerns about inflation and monetary policy. The yield on the 10-year Japanese government bond hovered near a 13-year high, signalling market expectations of tighter monetary policy as inflation pressures mount. 

China: Challenges in Manufacturing and Market Sentiment
Chinese markets faced headwinds as disappointing manufacturing data weighed on sentiment. n The Shanghai Composite Index declined by 5.55 per cent, while the CSI 300 Index fell by 5.17 per cent. n Hong Kong’s Hang Seng Index dropped 1.64 per cent.