Market Update - Month Overview (December 2024)
Summarised by Shara Cox (Report via Zenith)
December 2024 brought mixed fortunes for global and Australian markets. While international equities faced declines amid geopolitical and fiscal concerns, Australian markets followed suit, with property trusts and small caps hit hardest. Zenith has released a comprehensive report highlighting the major market trends, economic developments, and global factors influencing the financial landscape in November. This article provides a concise summary of the report's key insights.
International Market Summary – December 2024
Global markets faced a challenging December, with developed markets experiencing pullbacks after strong earlier performance. The MSCI World ex-Australia index declined by 1.94% in AUD-hedged terms, reflecting broad-based equity market weakness. U.S. equities, as measured by the S&P 500, fell 2.42% amid concerns over geopolitical uncertainty and tightening fiscal conditions. Global small caps and REITs also saw significant declines, with global REITs dropping 6.37%, highlighting investor caution as bond yields fluctuated.
Emerging markets showed mixed results. While the MSCI Emerging Markets index in USD terms was nearly flat (-0.14%), it gained 5.07% in AUD terms due to currency movements. Chinese equities benefitted from fiscal easing measures, though growth concerns persisted. Meanwhile, global bond markets saw divergent trends, with the Barclays Global Aggregate index dipping 0.86% as investors navigated volatility in yield expectations.
Despite weaker equity performance, the AUD depreciated significantly against the USD, falling 4.6% in December alone, providing some cushioning for Australian investors with global exposure. Investors remain cautious as fiscal and monetary policies across major economies signal a more constrained environment for growth in 2025.
Domestic Australian Market Summary - December 2024
The Australian market posted declines in December, with the ASX 200 Accumulation Index falling 3.15%, driven by widespread losses across sectors. Property trusts were particularly hard hit, with the S&P/ASX 200 Property Trusts index down 5.95%, reflecting heightened sensitivity to interest rate expectations and global REIT market trends. Small-cap equities also retreated, declining 3.07%, mirroring broader equity market weakness.
On the economic front, inflation remained subdued, with the annual headline CPI stabilising at 2.1%. This, coupled with continued robust labour market performance, saw unemployment steady at 4.1%. However, wage growth showed signs of plateauing, contributing to mixed signals about future consumption trends.
Australian bonds offered some reprieve, with the Bloomberg AusBond Composite Index gaining 0.51% for the month. Despite this, market participants are weighing expectations of potential rate cuts in 2025 against the Reserve Bank of Australia’s cautious approach to monetary policy. The Australian dollar's 4.6% decline against the USD further highlighted domestic challenges amid global currency pressures.
Looking ahead, the focus remains on maintaining stability amidst stretched valuations in key sectors like banking and property. Investors are navigating a complex landscape of modest domestic growth and broader global uncertainties.