On the final trading day of the year, global shares took a step back but sealed their most substantial annual surge since 2019, closing a year marked by noteworthy fluctuations in U.S. Treasuries.
In the closing months of the year, shares worldwide witnessed a robust uptick, propelled by declining benchmark bond yields, foreseeing potential central bank rate cuts in the coming year.
Analysts from Citi highlighted the year’s end scenario, noting, “In a slow holiday week, there was little to change the backdrop of resilient if slowing activity, underlying inflation still stuck around 3-4%, but a Fed that will be cutting rates regardless in 2024.”
The S&P 500 experienced a marginal 0.3% decline on the last trading day, narrowly missing its previous record closing high set on January 3, 2022. However, it closed the year with an impressive 24% gain, primarily fueled by a substantial surge in mega-cap tech stocks. The Dow Jones Industrial Average and Nasdaq Composite both saw dips on the final day but posted robust annual gains of 13.7% and 43.4%, respectively.
In Europe, shares closed the year with a nearly 13% annual gain, fueled by optimism about major central banks adopting a more accommodative monetary policy in the upcoming year. Meanwhile, MSCI’s world share index notched up a substantial 20% gain, marking its most significant rise in four years.
Samy Chaar, Chief Economist at Lombard Odier, pondered the sustainability of the positive market momentum, stating, “We have eaten a lot of the returns that were expected in 2024. The positive momentum in markets is obviously associated with the fall in yields, and so now the question is, how long can this trend continue?”
Chaar added that while future returns might be more moderate, settling long-term U.S. interest rates around 3.5% or 4% could prevent a significant reversal. He suggested that continued corporate profits might contribute to “a few percent of upside.” As the year concluded, the benchmark 10-year Treasury yield stood at 3.866%, up 1.6 basis points from the beginning of the year.