How have the financial markets performed?
Financial markets can look back on a favourable investment year. In addition, stock markets once again led the way, especially the US stock markets. Bonds achieved less pronounced returns but were positive. All in all, 2024 was therefore characterised as a ‘risk-on’ year with high returns for marketable securities and relatively low returns for government bonds.
Equities
The US economy performed better than expected, with the broad composite US S&P 500 index (comparable to the Dutch AEX) rising by an exceptional 30%, measured in euros. The Nasdaq Composite index, which includes many tech stocks, rose as much as 40%. European equities did not do badly historically but the 8% return still contrasted sharply with the US results. This can partly be explained by the fact that growth expectations for Europe have been revised downwards in recent months. Emerging markets slightly outperformed with a 15% return, supported by a rebound in the Chinese equity market (+23%). This can be attributed more to the low level in early 2024 than to an improving outlook.
Bonds
For bond markets, 2024 was a mixed year, with performance varying by segment. Corporate bonds performed relatively well, returning 8% for the more risky variants (high yield) and 5% for the safer investment grade corporate bonds. This was driven by stronger risk appetite among investors and better-than-expected corporate earnings in many sectors. In the case of high-yield bonds, the declining number of defaults also helped. Government bonds posted a modest but positive return of 2%, supported by a stabilisation of long-term interest rates in the second half of the year. A key overarching factor behind bond performance was the end of the series of central bank interest rate hikes.