Quarterly market update: December 2024

Strong U.S. stock markets

The U.S. stock market performed exceptionally well this year, driven by optimism for a "soft landing" of the U.S. economy – managing to control inflation without causing a recession.

Even the re-election of Donald Trump in November didn’t disrupt financial markets. Instead, the markets continued to climb, reflecting expectations of pro-business policies like potential deregulation and tax cuts.

Federal Reserve policy shift

The Federal Reserve shifted its policy this year, cutting interest rates in September and November, with another cut expected before the year ends.

Lower rates reduce refinancing costs for companies, giving a boost to the economy and supporting stock market growth.

At the same time, declining interest rates create a favourable environment for bond investments, which are also expected to perform well.

Eurozone growth slows

European stock markets saw slower growth compared to the U.S., but they were bolstered by hopes that the European Central Bank (ECB) might take further steps to address weakening economic data.

However, recession risks remain high, especially in Germany and France, where challenges in the manufacturing and services sectors are causing concern.

This slowdown has sparked worries about broader economic stagnation across the Eurozone.

Emerging markets shine

Emerging markets had a strong run in recent months, thanks to measures from the Chinese government aimed at boosting stock market performance and encouraging domestic consumption. 💪

These initiatives have been especially favourable for Asian equities, though ongoing geopolitical tensions between the U.S. and China remain a potential challenge.

Gold glitters amid uncertainty

Gold prices reached record highs this year, fuelled by expectations of more U.S. interest rate cuts. Investors flocked to gold as a safe haven amid economic uncertainty and a weakening U.S. dollar.

Central banks, particularly in Eastern and Asian nations like China and India, also boosted their gold reserves, adding to the demand.

Global conflicts keep uncertainty high

Geopolitical conflicts continue to weigh on market sentiment. The ongoing war in Ukraine and escalating tensions in the Middle East – particularly involving Israel, Palestine, and Iran – add layers of uncertainty.

These conflicts are likely to contribute to increased market movements through the remainder of 2024.

Selma's quarterly market update and rebalancing

Rebalancing refers to keeping your portfolio in line with your long-term strategy. Markets move each of your investments differently which can result in your portfolio being "out of balance".

The price for U.S. stocks remains above the long-term average, whereas other stock markets around the world are more fairly priced. We're thus still keeping a good portion of precious metals (gold and silver stored in Switzerland) to mitigate potential setbacks at stock markets and to protect the portfolios from new inflation worries.

Overall, adjustments are minimal this quarter. Selma reviews whether any changes are needed to enhance the stability of your portfolio. If adjustments are necessary, they will be implemented during the next scheduled transactions to avoid unnecessary trading.

Takeaways

Stay focused on the long run

Don’t get distracted by short-term market rallies or attempt to time the market. Instead, stay committed to your long-term investment plan, knowing that consistent, disciplined investing is key to achieving your financial goals.

Keep investing regularly

Regular, consistent investing helps manage risk by spreading your investments over time. This strategy, known as dollar-cost averaging, allows you to take advantage of lower prices during market dips, effectively "buying at a discount" and positioning yourself for long-term growth.

Remember the power of diversification

Your investments are globally diversified, which helps reduce risk by spreading it across different markets, sectors, and asset classes. This diversification positions your portfolio to better navigate market fluctuations and seize future growth opportunities.

👉 For further information, you can always check out your Selma mobile deposit plan and get more helpful insight from the Selma AI advice feature.

Remember: These changes only affect Selma's investment accounts. Pillar 3a accounts will not be adjusted based on this assessment.