Every December, veteran monetary journalist John Authers writes a couple of fictional funding supervisor, Hindsight Capital LLC, which, as its identify suggests, is aware of precisely what is going to occur in the course of the course of the approaching 12 months and positions its portfolios accordingly on 1 January.

Authers explains which trades would have been most worthwhile for Hindsight Capital and why, and it’s at all times value a learn.

Taking a leaf from his ebook, let’s have a look at among the greatest hits and misses of 2024, grouped beneath three broad themes: the US, China and South Africa. Importantly, let’s see what we are able to be taught from them. Next week, we’ll flip our ideas totally to the 12 months forward.

The Trump trades

Let’s begin with essentially the most notable commerce and the one for which you needed to wait the longest to see the outcomes. The US election solely happened in November and was one of many final of a protracted record of elections happening globally. The Republican sweep of the White House and Congress means Donald Trump ought to be capable to implement a lot of his agenda of tax cuts, tariff hikes and immigration restrictions.

It ought to be famous, nevertheless, that divisions have already emerged in Trump’s camp.

Firstly, a bunch of hardline fiscal conservatives rebelled in opposition to measures to maintain the federal government open and lift the debt ceiling (finances chaos is more likely to be an ongoing function of US politics).

Read: Trump, Musk throw congress into chaos with shutdown looming

Secondly, some nasty mudslinging occurred between what could be referred to as the tech billionaire wing of Team Trump (notably Elon Musk), which favours expert immigration, and the grassroots wing, which is strongly nativist. While each episodes have blown over, they spotlight that politics isn’t simple or predictable since there are at all times competing curiosity teams, even inside seemingly tight events or actions.

The US central financial institution, the Federal Reserve, reduce its coverage charge from 5.5% to 4.5% within the second half of the 12 months, together with a 25 foundation factors discount on the December coverage assembly. However, this assembly noticed its (unofficial) forecast, the so-called dot plot, marking up the rate of interest and inflation expectations for 2025. This is partly as a result of officers are beginning to incorporate anticipated Trump insurance policies of their estimates.

Read:
Fed lowers rates by quarter point, signals two cuts for 2025 [Dec 2024]
Fed’s Waller supports further cuts, says inflation moving lower [Jan 2025]
US inflation is set to back Fed pause after robust jobs data [Jan 2025]

This runs counter to what Fed Chair Jerome Powell famous within the November assembly when he warned in opposition to speculating on what these insurance policies and their affect could be. Ultimately, Fed officers are in the identical boat as the remainder of us. We solely know the outlines of what Trump desires to attain, not the small print of what’s going to really occur and when.

The upshot, nevertheless, is that market expectations for charge cuts have been scaled again considerably, whereas the benchmark 10-year Treasury rose to finish the 12 months at 4.5%.

It has continued rising within the first days of January, particularly after Friday’s sturdy employment report.

The higher-for-longer charges outlook within the US contrasts with different main economies. The comfortable Eurozone financial system implies additional charge cuts by the European Central Bank, weighing on the euro, as does political uncertainty in Germany and France.

China’s financial system additionally wants decrease charges and extra stimulus. The trade-weighted US greenback gained 7% in 2024, the perfect calendar 12 months in a decade, and has continued rising within the first days of 2025.

Trade-weighted US greenback index

Heaven for the Magnificent Seven

Within the US inventory market, it was one other barnstormer for the mega-cap tech corporations, together with Musk’s Tesla. These are generally often known as the Magnificent Seven, together with Apple, Microsoft, Amazon, Google guardian Alphabet, Facebook proprietor Meta, and Nvidia.

The latter’s unbelievable rise is fully on account of expectations that the factitious intelligence growth will proceed, however additionally it is an element within the outperformance of the others.

Magnificent Seven and the remainder

Source: LSEG Datastream

The focus of the US market is now at multi-decade excessive ranges, with the highest 10 shares making up round 40% of market capitalisation. It is commonly forgotten that many different markets are extra concentrated than this, together with the JSE, the place the highest 10 represent 43% of the All Share Index. However, it’s uncommon by the requirements of the world’s largest market.

Concentration shouldn’t be as large a danger as valuation, nevertheless.

Even although the US ought to arguably commerce at a premium to different markets based mostly on the superior profitability of its corporations (which more and more consists of prime companies from different nations that shun their home inventory markets in favour of a US itemizing), the extent of this premium is excessive. The US seems to be priced for perfection, buying and selling at 21.4 occasions anticipated ahead earnings, in comparison with solely 13 occasions for the remainder of the world.

Listen: US equity returns: A decade of caution ahead

Of course, this doesn’t inform us something in regards to the near-term outlook for shares – the momentum and short-term fundamentals definitely favour the US – however level to probably disappointing longer-term returns from US equities.

Opposites entice: Oil and gold

Gold’s 26% acquire makes 2024 probably the greatest years for the yellow steel since 1971, when President Richard Nixon decoupled the greenback from gold. It shouldn’t be fully clear why. Gold has traditionally had an inverse relationship with actual rates of interest. Since gold pays no curiosity, the chance price of holding it will increase as charges rise. However, 2024 didn’t see an enormous discount in actual charges.

Read:
Bulls expect gold to top $3 000 in 2025
Gold investors stay bullish for 2025 on Trump volatility fears

The unsure geopolitical atmosphere, subsequently, have to be a candidate rationalization. The primary factor is that leaping in after gold has rallied with the hope of creating a short-term acquire dangers disappointment (the identical will be stated of bitcoin, which additionally had a unbelievable 12 months in 2024).

Gold and oil in {dollars}

Source: LSEG Datastream

Notably, the unsure geopolitical atmosphere didn’t help oil on a sustained foundation. Escalations within the wars within the Middle East and Ukraine prompted volatility, however Brent crude oil closed 2024 at $74 a barrel, decrease than the place it began, although it has gained thus far in 2025.

No China cheer

One of the primary causes for the muted oil value final 12 months was disappointing demand from China, which additionally weighed on industrial metals corresponding to iron ore.

Electric car (EV) penetration is rising sooner in China than in some other market, with gross sales of latest EV and hybrid autos now exceeding conventional inner combustion engines. However, the opposite issue is solely a sluggish Chinese financial system.

Chinese authorities bond yields have fallen to report low ranges, despite the fact that yields have been rising in different nations.

Since bond yields transfer in reverse instructions to the worth, it was 12 months for Chinese bond buyers. However, the falling yield displays depressed expectations for future Chinese inflation and rates of interest.

Investors are nonetheless ready for Beijing to announce stimulus measures and financial reforms that may meaningfully alter the expansion trajectory and fight deflation slightly than papering over the cracks. A giant query for 2025 is whether or not they’re forthcoming.

10-year authorities bond yields

Source: LSEG Datastream

The tide turns

South Africans began 2024 with apprehension. Apart from basking within the afterglow of profitable the 2023 Rugby World Cup, there was little cause to smile. The nation was nonetheless strained by the affect of electrical energy disruption, whereas political uncertainty elevated forward of key nationwide elections.

At the top of 2024, nevertheless, the temper was very completely different. Load shedding appears a factor of the previous (unlikely, however it would by no means be as extreme once more as in 2022 and 2023), thanks to an enormous improve in personal manufacturing and operational enhancements at Eskom.

Read:
Inside Eskom’s stunning load shedding turnaround [Aug 2024]
No load shedding until 2029 – key report [Nov 2024]

Though the ANC carried out a lot worse than anticipated within the election, it instantly accepted the outcomes and began coalition talks. A centrist authorities of nationwide unity (GNU) was shaped, and it has prioritised growth-boosting structural financial reforms and ongoing gradual fiscal consolidation.

Progress has been made with electrical energy and a relaxed visa regime for expert staff, whereas Transnet quietly printed its Rail Network Statement just a few days earlier than Christmas, paving the way in which for personal gamers to run trains on its tracks. As with Eskom, the century-old rail monopoly is now coming to an finish.

Much work nonetheless lies forward for the GNU, nevertheless, and new crises maintain rising, notably the state of Johannesburg, the nation’s financial hub. But for the primary time in years, there’s real cause to really feel extra optimistic about South Africa.

Lower inflation additionally helps and paves the way in which for additional rate of interest cuts. Inflation was under the South African Reserve Bank’s 3% to six% goal vary in October and November, though in all probability briefly. The Reserve Bank reduce charges twice in 2024 and can in all probability reduce two or thrice once more this 12 months.

The home inflation outlook is benign, however the Reserve Bank will maintain a detailed eye on the trajectory of US charges. Reserve Bank officers will in all probability view the sudden weak spot of the rand in December and early January as vindicating their gradual strategy in an unsure world atmosphere.

Read:
Tumbling rand has a lot to do with SA’s ‘weak growth story’
Sarb repo rate expected to be at 7.25% by year-end, says Bloomberg Economics

Despite falling 4% in December, the rand ended the 12 months as one of many best-performing currencies in opposition to a globally sturdy US greenback, dropping solely 3%. Even although it broke via R19 to the greenback on Friday, this decline was consistent with different currencies.

In a nutshell, South African asset courses had 12 months throughout the board in 2024. In rand phrases, the FTSE/JSE Capped Swix Index returned 13%, and the JSE All Bond Index delivered 17%, a double-digit return in actual phrases. Listed property was the star home asset class. Coming from depressed post-Covid ranges, it surged 30% throughout 2024.

Listen/learn: 2024 vs 2025: A ‘supernatural’ look at listed property

Asset class returns in 2024 in rand

Source: LSEG Datastream

Patience nonetheless a advantage

The persistence of South African buyers has been severely examined lately, however it paid off in 2024. It is a reminder that long-term returns are at all times made up of some actually good years, interspersed with dangerous and boring ones. One has to sit down via the latter to learn from the previous.

The excellent news is that valuations are nonetheless cheap throughout home asset courses, which, along with enhancements in financial fundamentals, bode nicely for future returns. In different phrases, whereas there are numerous esoteric market methods that delivered extra returns in 2024 (as mentioned in Auther’s observe), Hindsight Capital wouldn’t have accomplished badly in any respect by merely investing in a stock-standard South African balanced fund.

That doesn’t imply that 2025 will likely be one other stellar 12 months. We merely don’t know.

The factor about hindsight is that it makes all the things appear apparent when, in reality, within the second, the uncertainty will be huge. Looking again, historical past at all times appears like a linear development of occasions, however in reality, it’s a large tree with branches sprouting off in all instructions. That we’ve ended up on the finish of a selected twig on a selected department shouldn’t be inevitable.

At the top of 2025, it would once more be simple to say ‘We should’ve identified’, however at its daybreak, a lot is unknown and unknowable. It at all times feels trite to say this, however it stays true: the perfect strategy is being affected person, appropriately diversified, and sticking to the long-term plan.

Izak Odendaal is an funding strategist at Old Mutual Wealth.

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