December 2024 Investment Summary

A negative month for the Passive range with returns ranging from -0.92%* for Passive 1 to -1.01%* for Passive 5.
P Acc share class with data sourced from FE analytics as at 31 December 2024.

December 2024 was a modest month for portfolios generally.

Most major equity markets sold off in December, with global stocks falling back from all-time highs. Chinese stocks rose on increased expectations for monetary and fiscal stimulus. However, the S&P 500 stumbled, decreasing -2.4% in December, while the Nasdaq eked out gains at +0.8%. Sector specific performance saw all segments detract. The FTSE 100 fell -1.3%, with markets weighed down by higher than expected inflation and struggling economic growth. The Stoxx Europe 600 Index was down by -0.4% this month.

Initially, risk markets rallied on the back of Donald Trump’s presidential victory, due to the implied relaxed regulatory policy framework and lower corporate taxes he has touted. 10 year US Government bond yields rising to 4.58% from 4.18% over the month, hovering at near eight month highs. The US Federal Reserve cut interest rates by a further 0.25% with the decision a ‘closer call’ than at previous meetings. Chair Jay Powell stating “from this point forward, it’s appropriate to move cautiously and look for progress on inflation” indicating fewer cuts than expected in 2025. Markets price a further 0.25% cut at the next meeting in January less than 3%.

US labour market government data showed payrolls increased by 256,000 in December, higher than analyst forecasts. and highlights the current labour market’s resilience. US retail sales measuring the quantity of goods bought, rose slightly more than expected, while consumer confidence fell from Novembers seven-month high, as household expectations for business conditions and personal finances deteriorated, with the view the introduction of tariffs would increase the cost of living. Unemployment data decreased back to 4.1%, from November’s 4.2%.

Tensions in the Middle East and the prospect of further escalation in the region remain despite the US-brokered ceasefire that has taken effect in Lebanon. The Israeli military have since pushed deeper into Lebanon, striking what it says are Hezbollah fighters and military assets in southern LebanonHouthi officials have promised to continue their attacks on Israel and international shipping for as long as the war in Gaza continues. The conflicts impact remains limited on the global economy while assets such as Brent Crude, remained range-bound around $73/barrel in December.

Non US Central banks are striking more dovish tones, however cutting cycles have been rapidly reassessed in recent weeks, following stronger data, fiscal/policy uncertainty and some stickier inflation.. A robust US economy, with the potential for increased spending and tax cuts, should be good for risk assets, but regional differentiation could be larger than usual, Heightened geo-political tensions remain a significant near-term risk.

WS Prudential Risk Managed Passive - Tactical asset allocation activity

We currently have an equity overweight of +1.35%, made up of a diversified basket across the US, UK, Asia and GEM. This is funded from small underweights in US Credit, European credit and cash. We also hold small overweight positions in US Treasuries, UK Gilts and Real Estate (REITs).

Emerging Markets

The fund invests in emerging markets. Generally less well regulated than the UK. There is an increased chance of political and economic instability with less reliable custody, dealing and settlement arrangements. The market(s) can be less liquid. If a fund investing in markets is affected by currency exchange rates, the investment could either increase or decrease. These investments therefore carry more risk.

High Yield Bonds

The fund invests in high yield bonds. High yield bonds carry a greater risk of default than investment grade bonds, and economic conditions and interest rate movements will have a greater effect on their price. Income levels may not be achieved and the income provided may vary.

Value of Investments

The value of investments, and any income can fall, as well as rise, so you could get back less than you invested. Neither capital nor income is guaranteed.

Investments Long Term

Investments should be regarded as long term and are not suitable for money which may be needed in the short term, you should always have a sufficient cash reserve.

Property

The fund invests in Property funds, property shares or direct property. In particular the following risks will apply:- The property market is illiquid and this can, in exceptional circumstances, lead to times in which clients are unable to dispose of part or all of their holding. Property valuations are made by independent agents but are ultimately subjective and a matter of judgement. Property transaction costs are high (typically around 7% due to legal costs, valuations and stamp duty)

Derivative Exposure

The fund invests in derivatives as part of its investment strategy, over and above their use for Efficient Portfolio Management (EPM). Investors should be aware that the use of these instruments can, under certain circumstances, increase the volatility and risk profile of the Fund beyond that expected of a fund that only invests in equities. The fund may also be exposed to the risk that the company issuing the derivative may not honour their obligations which in turn could lead to losses arising.

Umbrella Liabilities

If the liabilities of one fund were to exceed its assets, the other funds within the scheme might have to transfer across money to cover the liabilities.

Solvency of Bond Issuers

If the fund you choose invests in bonds there is a risk that the issuer may default, resulting in a loss to the portfolio.

Returns Are Not Guaranteed

What you receive when you sell your investment is not guaranteed; it depends on how your investments perform.

Inflation

Inflation will reduce the real value of your investments in future.

Taxation and Tax Relief

Levels of taxation and tax relief are subject to change.