Dear all,
As the year-end approaches, I want to start by saying we pleased to be sharing another year of market insights with you. November’s market performance underscored divergent trends. The S&P 500 and Dow Jones extended their record highs, while markets more closely tied to manufacturing, including the TAIEX, PHLX SOX, KOSPI, and European equities, saw relatively choppy performance, posting losses between 0~3%. Meanwhile, the 10-year Treasury yield settled at around 4.3%, marking a modest rebound in bond prices. The U.S. Dollar Index (DXY) briefly surged to 107.5. Lastly, commodity prices mostly edged lower.
Three Key Trends Materialized as Forecasted: Rate Cuts, Soft Landing, and Shifts in Manufacturing Cycle
Looking back at our January outlook, the three major trends we projected for 2024 have all unfolded. First, liquidity conditions indeed shifted toward easing this year, with central banks such as the Fed, European Central Bank, Bank of England, and Bank of Canada all embarking on interest rate cuts. The global proportion of central banks cutting rates rose from 36% at the start of the year to 69% in November, creating a more accommodative financial environment. Secondly, the U.S. economy steered clear of a hard landing feared by markets, with consumer spending seeing moderate growth despite the exhaustion of pandemic-era excess savings. The Atlanta Fed’s GDP Nowcast currently projects U.S. economic growth to remain at around 2~3%, supporting the global economy and averting a global recession.
Lastly, shifts in the manufacturing cycle also unfolded as expected. The global manufacturing industry entered an upswing in the first half of the year, fueling broad-based gains in global equities. Moving into the second half of the year, the MM Manufacturing Cycle Index started to retreat with more pronounced fluctuations, leading to increased volatility and rotation across various stock markets. U.S. stocks continued to hit new highs, whereas other markets that are more sensitive to manufacturing cycles, such as Taiwan, the Philadelphia Semiconductor Index (SOX), and European equities, began to experience heightened volatility.
Read more about our projections at start of year: CEO House View | Global Economic Diagnosis for 2024
Narrowed Scope of Rate Cuts in 2025, But Still Potential for Another 2~3 Cuts
Given the above context, have there been any unexpected developments or trends that could carry over into 2025? One key development is the impending full-blown Trump presidency (i.e., a Trump victory with Republicans gaining full control of Congress), which has disrupted the short-term outlook for certain assets, including Treasuries, gold, and the dollar.
Trump’s comeback has reignited
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