2024 Wrapped: Volatility, Records & Opportunities Ahead
The year 2024 has been marked by significant movements across several sectors. Despite Germany’s struggling economy DAX emerged as one of the best performing European indices and thus, outperforming the Nordic indices. Commodities experienced a volatile year, yet oil ended up just in the minus while coffee and cacao set record highs. As the year 2025 begins, markets are faced with continued uncertainty, shaped by geopolitical tensions and new US policies under President Trump.
European Market
On the European market, the Nordic indices have underperformed compared to Germany, whose index, DAX40, has risen around 20% in 2024. Even though Germany, the motor of Europe, has been struggling with a problematic economy and an automotive industry synonymous with union strikes and lowered demand. However, what has then spurred the DAX to become the best-performing European index of 2024?
Although Germany has experienced economic stagnation with minimal growth for the second consecutive year, some of its DAX constituents have outperformed the market with overseas sales and rising demand for Artificial Intelligience (AI). SAP, active in the AI and cloud computing space, has been one of the main drivers, contributing around 40% of the overall growth in DAX (Stoxx.com).
Unfortunately for the Nordic indices, Sweden came on top with around a 4% increase. While it performed best compared to the other Nordic countries it is far behind the US. It is believed by one of Sweden’s most prominent businessmen, Jacob Wallenberg, that the biggest problem is rooted in Sweden’s culture on risk. Hence, he sees it as fundamentally necessary to take steps to ease the barriers for companies to grow in the spaces of AI and not stand too much in their way.
Even though the Danish OMX25 Copenhagen was not on its way to deliver a record year, the small appreciation it had accumulated in 2024 was instantly wiped out on December 20th when Novo Nordisk failed to meet expectations in one of its weight-loss drugs studies. In the short-term experts are inconclusive in terms of its future performance however, in the long-term Novo Nordisk has many legs to stand on and therefore a stable foundation to withstand temporary setbacks.
Commodity Market
In terms of commodities, oil had a bumpy ride in 2024. Prices were affected by weakening demand from China, tensions in the Middle East, and OPEC considering increasing production levels as they were falling behind the US, which caused oil prices to momentarily decrease. However, no production increases have occurred as they await the actions of the new president, Donald Trump. Donald Trump himself has claimed he will ramp up oil production. Therefore, 2025 could continue along a volatile path, opening opportunities in the short run.
As we reported in a previous article, coffee and cacao prices have increased to record levels due to unfavorable conditions for crop growth. While prices have already reacted to this, reserves are reaching historically low levels, and the effects on consumers will become more noticeable during 2025. While it is believed that coffee prices will decrease in 2025, the low reserves remain a worrying sign if deteriorating weather conditions persist. Therefore, it can be expected that high sensitivity will lay the foundation for a volatile coffee market in 2025.
As we mentioned in a previous article, gold could prove to be a good hedge against uncertain times. In 2024, gold had one of its best years in a decade, with around a 30% price increase. Considering geopolitical tensions and the inflationary policies proposed by Donald Trump, 2025 could also be a favorable year for gold. However, it is important to note that a strong USD will lower the demand for gold and subsequently decrease its price. While inflation may make gold an attractive hedge, an increase in interest rates will boost demand for the USD and, in turn, reduce demand for gold.
Historically, in the 1980s, high inflation prompted the Federal Reserve (FED) to increase interest rates, strengthening the USD. Although gold prices initially declined due to higher interest rates and a stronger USD, they eventually rose as persistent inflation sustained demand for gold as a hedge.
US Market
Moreover, a 2024 market summary is not complete without mentioning US stocks. Many milestones were surpassed with one being S&P500 reaching the 6000 mark. Compared to previous years the market improved with a decreasing inflation and lowering interest rates making the cost of borrowing more favorable for companies. However, while 2024 turned to be a good year for many large US stocks it was not for certain. As we are living in a fast-paced environment it is easy to forget previous low-points and the factors causing them. In July/August 2024 the US had gone over 4 years without cutting interest rates and while markets were anticipating the then coming cut in September fears started growing over the actions coming too late in the light of increasing unemployment numbers. However, so far, no hard landing has occurred, and the increasing unemployment numbers in July 2024 were rather due to temporary layoffs then a failing economy and the major US indices set off to reaching new highs.
What has then also come to define 2024 is the US presidential election with Donald Trump standing as the winner. The election also brought a bull run for Crypto as a more favorable stance is assumed to be taken by the new administration.
Moreover, it is well-known that unpredictability is Trump’s middle name and through his claims he shapes the capital markets investors try to navigate. While being able to anticipate his next claim would be valuable, understanding his true intentions would be even more insightful. It remains challenging to determine whether some of Trump’s statements are intended to create leverage for negotiations with other countries or serve another purpose entirely. As a result, 2025 is likely to be a volatile year, deviating from the norms traditionally associated with a president's actions. We must, however, adapt to the prevailing circumstances, recognizing that what is now considered "normal" is far from what once was.
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