Fresh Opportunities
The market bell has kickstarted the new year, and let’s hope that the smell of fresh opportunities finds you. The beginning of 2025 is an opportune time to examine fresh ideas, evolving trends, and the ever-changing dynamics of global and local markets. From Wall Street to all emerging markets, Johannesburg’s very own exchange, to Bombay and all the way to Shanghai, here's to a year filled with opportunities.
A Golden Year
A refresher of 2024 would be a good place to start, given it was a very rewarding year in the capital markets. Performing exceptionally well, gold glittered on the back of market volatility and some geopolitical uncertainties in a year filled with a lot of elections around the globe. The commodity had its best year in 14 years, closing the calendar up 26%, far surpassing other major asset types in dollars.
In ZAR terms, the NASDAQ Index closed the year up 29.6%, and the S&P 500 Index was up 28.5%. China and India had a strong year, up 23.2% and 14.8% respectively, while the FTSE/JSE Capped SWIX Index was up 13.4% for the year. These pushed the MSCI Emerging Markets Index, ending the year up 10.9%. The MSCI UK and MSCI Euro indices returned 11.0% and 5.0% respectively, the MSCI World Index ended 2024 22.5% in the positive.
The Prep Talk Before the Prep Talk
Investors who are in it for the long term tend to be more relaxed, taking a passive approach to their investments, while predictors like having their fingers on the pulse. There are different market exposures out there, by geography, or sector, or even by asset type; and a new year is an opportunity to reevaluate your positioning and targets.
Diversification is always on the top list of things to do when it comes to investing, and whether you are being passive or aggressive in your style, this approach remains relevant. Market expectations for 2025 vary depending on global macroeconomic conditions, sector-specific trends, and geopolitical developments, which is why diversification is so important.
What to Watch Out for
- Equity Valuations: Are extremely high on growth assets, so there’s some uncertainty. Meanwhile, inflation and monetary policies will still dominate news, influencing asset pricing through the year. Renewable energy, which supports the AI infrastructure, are two sectors to watch out for, with tech stocks trading at high valuation but still carrying momentum from the last 2 years.
- Trumponomics: Demand for raw material from Trump’s infrastructure policies might benefit some emerging markets reliant on natural resources, while others, like China, might be on the backfoot as tariffs and trade wars resume between these two countries. The US has classified Tencent as a Chinese military company, dealing a blow in companies like Naspers, thus showing the trade wars’ ripple effect. His protectionism of the dollar, tax cuts, and “America first” approach has been good for the US market, as indicated by the dollar strengthening and a resurgence in tech stocks after his election victory.
- Geopolitics: Have been a major influence on markets in 2024 with all the elections, which tend to come with policy changes. There is a lot of uncertainty with US-China relations, with both countries blacklisting companies doing business in each other’s backyard. This will influence supply chains, trade, and tech stock pricing. BRICS nations may influence and reshape global trade dynamics as there is a push by some of these nations to de-dollarise trading. Trade wars, sanctions, and conflict tend to disrupt global markets, and 2025 threatens to carry some of these burdens.
- Fixed Income: The bond market cannot be ignored, especially with the interest rate cycle period we are in. The local bond outperformed the local equity by some margin, as the South African Reserve Bank also started to push rates down since the cooling from inflation in 2024. The fixed-income asset class offers a unique blend of yield, safety, and capital appreciation opportunities. The rate cuts, coupled with fiscal stimulus and geopolitical factors under Trump’s policies, might create an environment for investors to consider bonds as part of their diversification strategy.
In the spirit of January optimism, let’s resolve to stay diversified, monitor inflationary pressures, and seize opportunities in sectors poised for growth. Volatility also means opportunity, and short-term downturns should not alter your long-term investment goals.
Disclosure
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