Finimize - 🎅 The year in review

What’s going on here?

Investors can breathe a short sigh of relief: the global economy averted a recession in 2024 and inflation broadly cooled, despite many curveballs.

What does this mean?

The world’s central banks have mostly managed to calm inflation via higher interest rates, without murdering the global economy in the process. “Mostly” being the operative word: inflation is a lot closer to target, but it’s still not there yet. So central banks have taken a go-slow approach to trimming those high interest rates. Governments, meanwhile, have been spending record amounts on interest payments and relying on even more debt to grow – and that’s been stoking all new fears about stability. On top of that, geopolitical jitters and an economic slump in China have kept markets on their toes. Still, the world’s economy showed remarkable grit this year.

Why should I care?

The bigger picture: Don’t miss the forest for the trees.

Markets love to fixate on the latest headlines – think interest rate decisions, country-by-country growth data, and earnings reports. But the real drivers of long-term returns are bigger, foundational changes: governments playing more of a role in markets, AI revolutionizing industries, growing economies chipping away at US dominance, and so on. The challenge – and the opportunity – is to look beyond the day-to-day and position yourself for those seismic shifts.

For markets: Don’t forget your inner contrarian.

Markets are often driven by shared assumptions that shape confidence and push prices, but the biggest moves happen when reality catches folk off-guard. Think about 2023’s unexpected stock rebound after 2022’s doom and gloom, which itself followed a euphoric run. The fact is, consensus thinking tends to be strongest – and, therefore, the most vulnerable – at turning points. So don’t just follow the crowd: make sure your portfolio is built to weather different scenarios, and seize opportunities when the unexpected plays out.

What’s going on here?

If the theme of 2023’s playlist was resilience, 2024 has been all about doubling down on what worked – and bracing for what’s coming.

What does this mean?

The past year brought back some serious 2021 FOMO vibes: AI propelled Big Tech stocks to new heights and the S&P 500 soared 24% – more than triple what international stocks gained. The long-awaited rebound for global, small-cap, and value shares… didn’t happen. But gold more than made up for that. It jumped over 25%, fueled by strong central bank demand and increased worries about geopolitical risk, economic uncertainty, and currency stability. Those same fears – and a tech rally – helped bitcoin break above $100,000 for the first time. In the bond market, corporate assets did well – but government ones stagnated, with yields remaining high. Together, these markets pointed to a world that’s shifting: uncertainty is on the up.

Why should I care?

For markets: Ride the wave, but watch the tide.

Momentum was a winning play in 2024, and those who stuck with the champions scored big. But that strategy can backfire: momentum thrives on the stories we believe about markets, tech, or the economy – and when the plot changes, so does the trend. Betting on momentum is about much more than company fundamentals: it’s predicated on folks’ expectations. So stay sharp, and be ready to pivot when the narrative adjusts – or risk being left behind.

For you personally: Diversify and conquer.

2024 rewarded the bold, it’s true. But remember that surprises can flip the script – just as they did in 2022 and 2023. So if you don’t want to lose the farm, consider spreading your money across geographies, investing styles, and asset classes. Diversification may not be flashy, but it just might keep you on track toward your long-term goals – no matter what twists and turns the market takes.