Market review
A summary of how financial markets performed during the fourth quarter of 2024.
It was a good quarter for most equity markets as President Donald Trump’s return to the White House was largely seen as positive news for businesses, while New Zealand share markets were supported by 100 basis points (1.00%) of easing in the Official Cash Rate (OCR). Bond markets on the other hand, were generally weaker despite most central banks delivering interest rate cuts.
Global markets
US equity markets had a strong quarter, buoyed by Trump’s election victory. His pro-business and tax policies are largely seen as positive for local companies. Both the S&P 500 and Nasdaq 100 reached record highs, finishing the quarter up 2.4% and 6.3% respectively.
Strong performing sectors included consumer discretionary companies, which highlighted the resilience of the US economy, while financial and technology firms also did well. On the other hand, the materials sector underperformed, as did real estate, which struggled against the backdrop of higher bond yields.
Asian markets were also generally strong, with the Nikkei 225 up 5.4%, benefiting from a weakening Japanese yen, while the Shanghai Composite ended the quarter up 0.7%, recovering from a steep decline early in October. Meanwhile, European markets underperformed as concerns Trump’s tariffs could impact growth across the continent.
Global bond markets were lower over the quarter, despite most central banks delivering rate cuts. Ordinarily, lower interest rates are good for bond investors.
In the US, the Federal Reserve (the Fed) lowered interest rates by 25 basis points in December (on top of the 25 basis point cut it delivered in November). However, it said that slower progress on inflation, strong growth and relatively stable unemployment translated to a slower pace of rate cuts ahead.
New Zealand market
The NZX 50 Index outperformed many of its overseas counterparts, gaining 5.5% over the quarter. The market was supported by the 100 basis points (1.00%) of easing in the OCR, and a reporting season where earnings held up reasonably well.
On top of the 100 basis points of cuts by the Reserve Bank of New Zealand (RBNZ) it is expected that the OCR will be lowered further in the first half of 2025.
Despite the large drop in the OCR, New Zealand bonds only delivered small gains, as pressure from weaker-performing global bond markets provided some headwinds.
Economic data was generally weak over the quarter, with growth (GDP) falling 1.0% in the third quarter. It followed a 1.1% slump in the previous quarter. These were the biggest quarterly falls since late 2021 – at the height of the Covid-19 pandemic and lockdowns. Elsewhere, retail sales have now registered nine consecutive quarters of decline, while unemployment rose to 4.8% in the September quarter, up from 4.6%.
Important information
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Past performance does not indicate future performance. The actual performance realised by any given investor will depend on many things, is not guaranteed, and may be negative as well as positive.
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