US stocks dominate but all markets deliver
Global stocks were up almost 20 per cent in sterling terms, powered by those dominant US tech firms. In contrast, bonds managed to eke out low single-digit percentage returns.
Yet it wasn’t a bad year for the UK (or other regions) – the British financial and industrial equity sectors performed as well as or even better than their global peers. It’s just that there was a yawning chasm not only between the returns of technology firms either side of the Atlantic, but also in their relative size and significance in each market.
Nvidia, the darling of the AI revolution once again, left active stock-pickers agog, as it mushroomed to almost three times its value at the beginning of January 2024.
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US economy continues to lead the way
Even for AI sceptics, American exceptionalism cannot be attributed solely to the swelling price of anything even vaguely connected to silicon chips. US productivity has been leaving both the UK and Europe in the dust for quite some time now, and 2024 was yet another salutary reminder of just how robust the American economy is.
One thing to keep an eye on this year is the US hiring rate. By the time you see an uptick in job layoffs, a recession is probably already underway. A slowdown in hiring is a more concerning augur, and at present the rate is the joint lowest it has been in over a decade.
How did our portfolios perform?
Portfolios tilted more towards equities did exceptionally well, while less risky portfolios posted more modest gains – but gains nonetheless.
Compared to the typical UK private client portfolio, our index tracking approach once again outperformed handsomely, and that’s because we have no illogical bias towards UK stocks, we don’t charge fees for active management, and we allocate no more and no less to those barnstorming tech stocks like Nvidia than the market consensus suggests.
What is in store for investors in 2025?
The only prediction we will make is that would-be prophets will continue to fail miserably. The reason we can be so confident of that is that while some things like the weather are merely difficult to forecast – a technological challenge – anything involving a human is fundamentally impossible to preempt.
Unlike generative artificial intelligences, people do not merely dance a strange combination of jigs that have gone before; we invent new ones. We solve problems through creativity. It is those acts of creation – which are consciously intended to improve our lives, which let us do more with less, and which are the true propellant of stock markets in the long term – that cannot be foreseen.
It is also why, as the Austrian-British philosopher Karl Popper argued, we have a duty to be optimistic. Yes, the future is unknowable – but only because it is in our hands.
About William Morris
William is Head of Investments at Weatherbys Private Bank. He has over a decade of experience encompassing investment advice, portfolio optimisation and risk modelling, and enjoys bringing this world to life in a friendly and engaging way.
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