2024 investment market review

Investment markets in 2024 have had a remarkable year. With significant global elections, declining inflation, falling interest rates, and strong share market performance, it has been a year to remember. We reflect on the year and look ahead to what 2025 might bring.  

A year of unexpected gains  

2024 saw investment returns surpassing most expectations. The US economy managed to avoid a major slowdown, and ongoing excitement towards artificial intelligence technology fuelled the performance of some of the world’s largest technology companies. As a result, the US dollar and the tech-heavy US equity market, were generally some of the top performers over the year. 

In New Zealand, the Reserve Bank's unexpected interest rate cuts, prompted by falling inflation, were a significant development. During the year, the Official Cash Rate was slashed by 125 basis points to 4.25%. This move helped the New Zealand share market outperform the S&P 500 in local currency terms during the latter part of the year. 

Global events and market volatility 

The year was also marked by numerous elections, including the pivotal US election, and many central banks began lowering interest rates. Geopolitical conflicts persisted, market volatility was high, and China introduced various policies to support its struggling property market. Investors had to navigate these events alongside the usual economic and corporate performance news, making it a busy year. 

Looking ahead to 2025 

As we move into 2025, the investment outlook remains positive. There’s a favourable macroeconomic environment with falling inflation and interest rates, supportive central banks, continued US economic resilience, rapid technological innovation and the New Zealand economy is showing signs of recovery. This strong starting point suggests potential for another good year for portfolio returns and provides confidence that markets can withstand surprises. 

Key uncertainties and opportunities 

One of the biggest uncertainties is the direction of foreign trade under President-elect Trump's second term. His administration's tariff policies could create winners and losers, leading to greater performance dispersion across companies, industries and countries. This dynamic is perhaps one of the key themes we expect to see next year and presents interesting opportunities for investors. 

Despite risks such as high market valuations, strained government fiscal positions and persistent geopolitical tensions, the strong macroeconomic foundation allows for a mindful approach to these risks rather than being fearful of them. 

MAS funds are positioned appropriately for what 2025 may bring. We prefer the US, with key positions in some of the large tech or tech-like companies that are helping to build out exciting AI technology. We have also tilted towards sectors that should benefit under Trump’s America first policies. For example, banks, mid-sized stocks and infrastructure developers. Outside the US, where there is arguably more value, we remain selective and mindful of potential trade uncertainty. Locally, the New Zealand share market has performed well over recent months, and we believe that can continue. The funds also hold quality New Zealand corporate bonds, which are now benefiting from falling interest rates. 

Focusing on long-term goals is crucial  

2025 is likely to bring several crosscurrents and volatility, but this is a natural part of investing. Staying invested according to your risk profile and focusing on long-term goals is crucial. We continue to actively manage MAS portfolios, adapting to market conditions and leveraging volatility to explore new investment opportunities. 

While 2025 holds significant risks and opportunities, MAS will continue to position our funds to seek to protect and grow our members' wealth.