Global equities have performed well in 2024; However, the FTSE 100’s efforts have been woeful
16 December 2024, 07:45
Considering the demanding imponderables that global investors have had to circumnavigate throughout a year of unprecedented political volatility and economic instability, it staggers me that most global equity markets have performed with considerable aplomb and prowess.
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Investors and analysts have had to weave their way through the following maze of challenges – 70 global General Elections, with the US - Presidential Election this month of the greatest importance; fierce wars in Ukraine and in Gaza, Lebanon, Iran, and Israel, culminating with political implosion in Syria.
Inflation issues were supposed to evaporate in 2024. However, interest rates have taken longer to fall in the Western world than many would have hoped for – FED rate July 2024 from 5.5% to 4.75%, UK - Bank Rate July 2024 from 5.25% to 4.75%, ECB from June 2024 from 4.25% to 3% from 18th December 2024. It is thought that inflationary issues could rear their ugly head before 2025 is out, though both the Fed and MPC could cut rates by 25 basis points this coming Thursday (19th December).
Since the Covid Pandemic we have seen global debt rise to eyewatering and unprecedented levels since 2019 – US from $22 trillion and change to $34 trillion. Add global migration to the list of issues and they make up quite an intoxicating financial cocktail.
The Performance of US stocks in November proved to be the best month of the year so far. This upward trajectory appears to accentuate the “extreme disconnect” between investor bullishness on US assets and bearishness on the rest of the world. Euro-area inflation climbed above the European Central Bank’s 2% target and the yen advanced more than 3% against the dollar recently.
But after a year in which US unemployment remained near record lows to 4.2%. Wall Street looks to remain more than content about what’s looming on the horizon. A Trump government, determined to deliver growth and “Earnings growth forecasts for 2025 in the US remain optimistic, at around 15%.”
Set out below shows the performance of the leading global bourses since the beginning of 2024 –
Global indices YTD – FTSE +7.50%, FTSE 250 +7.06%, DAX +21.69%, CAC40 -1.61%, DJIA +16.21%, S&P500 +27.58%, NASDAQ +34.95%, NIKKEI +18.57%, HANG SENG +18.96%, SHANGHAI +14.50%. Wall Street’s performance has been outstanding with the major seven tech titans providing a platform of staggering momentum for Nividia (+178%) very much in the vanguard, ably supported by TESLA (+75%) AMAZON +51.71%, APPLE +33.66%, ALPHABET +37.13%, META +79.14%, NETFLIX +96.13% and ARM +120.41%. It is interesting to observe that TESLA has rallied by 60% since Elon Musk became associated with the Trump regime, which takes office on 20th January 2025.
There have been other outstanding performances such as VISTRA CORPORATION, an integrated retail electricity and power generation company based in Texas – up 280% year to date. Also, who would have believed that Walmart, the world’s largest retailer would rally by 77% this year with Abercrombie & Fitch in close attendance – up 56%. Thanks to inflation delivering higher levels of interest rates, US and UK banks have largely put in stellar performances, year to date – JP Morgan (+39%), Wells Fargo (+42%), Goldman Sachs (+50%) and Bank of America (+34%).
NatWest’s recovery – not before time, is especially commendable – up 84%, with Barclays in hot pursuit (+73%). Lloyds Banking has unfortunately been dogged by motor sales commission issues. Metro Bank, thanks to its balance sheet being shored up by fresh capital has seen its shares rocket up by 124%.
The defence industry unsurprisingly has been a sector to follow this year, with outstanding performances from Rolls Royce (+91%), Qinetiq (+32%, RTX Corp +38%, Leonardo (+68%) and Rheinmetal (+105%). Boeing is down 32.61% this year and many intrepid punters think there is every chance of a recovery in 2025. After all Airbus and Boeing are the only large global aircraft manufacturers.
On the retail front in the UK, NEXT (+23%), TESCO (+25%) and M&S (+44%) have put in outstanding performances. The progress IAG has made this year will not have escaped their supporters, with shares up 80% this year. Investors had great hopes for the house-building sector. All are underwater – Persimmon, Taylor Wimpey and Barratt Redrow. Labour has plans to build 1.5 million houses in this Parliament. A shortage of skilled workers would seem to make these plans look a little over ambitious.
The performance of the FTSE 100 is seen as parsimonious at best. It is of course an international index, with energy, mining and telecoms having performed especially poorly this year. However, the damage inflicted by the Conservatives, in failing to encourage investment to the UK post BREXIT, has been painful. The Tories were presented by a ‘Heaven sent’ opportunity to attract financial business to the UK but failed to ‘grasp the nettle.’
The City of London’s frustrations have been exacerbated by Labour’s draconian taxation plans. The business community feels Labour’s plans will discourage growth and investment in the UK. Labour won the public backing of over 120 business chiefs in a letter before the election – but the enthusiasm of those executives appears to have dimmed since then, thanks to growth plans, which were promised, appearing to go up ‘in a puff of smoke.’
The capital flight to the US has been very noticeable, where companies of a pari-passu nature, are valued as much as 30% more in the US than in the UK. This year, CRH, Tui Travel, Flutter, Smurfitt Kappa, Ashtead and Invidior, valued at approximately £107 billion, have swapped their primary issue to the US and there may be more to follow. Private equity has also been rampant in the UK hoovering up UK assets which look cheap.
The CAC 40 has been out of sorts thanks to political unrest. France’s economy together with Germany’s looks to be under duress. There are of course only 30 stocks in the XETRA DAX. The likes of VW, BMW, BASF and Mercedes have seen their shares sink below the Plimsoll line. Thanks to the rejuvenations of Deutsche Bank (+36%), and upbeat efforts from Siemens, Henkel, Hannover Re and Allianz, the DAX looks to have performed satisfactorily.
The global IPO market has been very disappointing in 2024. According to Dealogic data analyzed by EY, companies raised $27.3 billion in 121 initial public offerings in the U.S. so far this year, compared to $19.4 billion in 101 IPOs during the same period of 2023. The UK is currently in 20th position with just $1 billion raided ahead of today’s Canal+, which is valued at circa $5 billion.
There is also the prospect of the controversial £50 billion on-line fashion titan, Shein’s public offering in 2025 and the possibility Lloyds of London, the insurance mogul, coming to market. Shareholders in LSEG will be delighted with the progress made in recent times, but observers may be shocked to know that only 4% of the exchange’s income came from equity business.
The new Labour Administration has had an undistinguished start to its rein. Too much downbeat comment, with anti-business taxation, which has led to GDP falling by 0.1% in September and October, when the outlook pre the General Election looked encouraging. We must see incentives to attract investment into London.
How can London be expected to challenge New York or any other major financial centre when it charges stamp duty for the trading of shares? London still blazes the trail in foreign exchange, derivatives and bonds. However, the ‘City’ badly needs a serious piece of the equity and M&A action. The LSE, AIM and Aquis Exchange are there, willing and able to serve!
What of 2025? Global investors are supportive of the idea that the US, Japan, China and India will continue to make progress. Cumuli-nimbus clouds hang over Europe. The UK has a compendium of aspiring SMES and given investment incentives required, the tools are there to capitalise.
To end on a happy note, it is great news that Warren Stephens, a distinguished banker and businessman from Arkansas, has been appointed US Ambassador to the Court of St James. He is a committed supporter of the UK and hope springs eternal for a positive engagement with President-Elect Trump from January 2025.
Merry Christmas!
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