Global equity markets and global bond markets finished off 2024 with a weak month to close out what was a spectacular and a solid year for equities and bonds respectively. After a difficult start to the year, global bonds (hedged to NZD) have returned just over 3% for the year. Central banks continued to lower short term interest rates, but unusually for rate-cutting cycles, the long end of the curve has moved higher in some countries/regions. For example, in the US, the 10-year bond yield has moved from below 3.7% to over 4.5% since the Federal Reserve kicked off their much-anticipated rate-cuts in September. The Bloomberg Global Agg Index (NZD Hedged) was down -0.9% for December, and down -1.2% for the fourth quarter. The MSCI ACWI Index (NZD Hedged) was down -2.1% for December and up 1.2% for the quarter. The Kiwi fell sharply over the month and the quarter, versus the USD in particular, so returns for unhedged investors in global equities were strong, up 3.1% for the month, and 12.4% for the quarter. Closer to home NZ equities were up in both December (0.4%) and over the fourth quarter (5.6%).
The US election took centre stage over the fourth quarter with the decisive win for the Republican party being well received by the US equity market in particular where November returns were strong. Uncertainty on the extent new global trade or tariff policies might be rolled out by the incoming Trump administration was reflected in some weakness in non-US markets.
The fourth quarter saw a resumption of the trend of the last couple of years whereby the growth-focused sectors like Communication Services (+4.6% for the quarter in USD terms) and Information Technology (+4.2%) have dominated. Consumer discretionary was the strongest sector, advancing 5.3%. Materials (-15.2%) was the weakest sector, with Healthcare, Utilities and Real Estate all falling around 10% over the last 3 months of 2024. On a regional basis the New Zealand and Japanese markets closed the year with a strong quarter, both up over 5%. Japan equities were up 19.2% for the year, behind only the tech-heavy US market. New Zealand equites returned over 11% for the year, ahead of the likes of Australia, the UK and Europe where high single digits gains were posted.