December 2024 Investment Summary

A negative month for the Active range with returns ranging from -0.87%* for Active 1 to -1.23%* for Active 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 Lebanon. Houthi 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 Active - 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).