US shares make 2024 a year to remember
January 2025
Investors with diversified portfolios had much to celebrate in calendar year 2024 as sharemarkets navigated the uncertainty of the U.S. election result to post a second consecutive year of strong gains.
Unhedged global shares rose by 11.9%1 in the December quarter, underpinned by a continued rally in the U.S. stockmarket led by technology companies such as US telco and chipmaker Broadcom. The previously unsung hero of the artificial intelligence (AI) boom now ranks alongside Nvidia and Meta Platforms as a global tech titan.
The double-digit gain pushed annual returns from unhedged global shares to 31%2 , while global shares hedged to offset FX movements rose by a more modest 19.6%3 over the year.
Netflix, Amazon and Taiwan Semiconductor Manufacturing also ranked among the best U.S. stocks in the December quarter, as did airline stocks like United Airlines and Delta Air Lines. The U.S. carriers recorded better profits as flight demand continued to rebound from the COVID-19 hiatus.
Outside the U.S., the Japanese Nikkei 225 index gained 5.3%4 for the quarter to cement its recovery from the largest ever single-day drop in its history last August.
The strong gains from international shares helped cushion diversified portfolios against weaker gains from government bonds globally over the quarter, which faltered amid concerns that interest rates may rise again over the longer term, or that growing public debt may ultimately prove unsustainable.
The Australian sharemarket also fell slightly over the quarter but posted a healthy 11.4%5 gain for the year, led by Commonwealth Bank’s rise to $153.25 and strong gains for insurers like QBE Insurance Group and IAG after higher premiums boosted their revenue. Qantas rose by 20.89%6 as it enjoyed the same tailwinds as its global peers.
Looking ahead
Likely challenges for markets in 2025 mean it’s important to maintain a well-diversified portfolio that can adapt to a wide range of potential scenarios.
Record highs in the U.S. sharemarket could make it vulnerable to dips over the course of the year that could flow onto the Australian market too.
The uncertain policy agenda of new U.S. President Donald Trump is another wildcard for investors – though, on balance, the new administration is likely to introduce a mix of policies that support business confidence and limit the risk of a deep recession.
Small companies may be in for a better run both globally and in Australia, given they appear better value than big companies and tend to do well when interest rates fall. It’s likely that U.S. interest rates will be cut up to three times this year, and Australia’s official cash rate could be cut 2-3 times this year to 3.6%7 .
And what of the AI boom? Chances are that companies actually using AI within their operations – rather than developing it – could deliver strong gains as the technology is applied to their daily business activities. Healthcare and consumer goods are two industries widely expected to reap real benefits from the practical use of AI.
Beyond the sharemarket, U.S. government bonds could become more attractive relative to shares more than any time since 2002 if yields are sustained above 4.5% (as the yield from a bond goes up, it’s capital value falls). There may also be opportunities to invest more in areas such as emerging market U.S. dollar bonds or private credit.
1 On an Australian Dollar unhedged basis, index: MSCI ACWI unhedged into AUD (with net dividends reinvested)
2 On an Australian Dollar unhedged basis, index: MSCI ACWI unhedged into AUD (with net dividends reinvested)
3 On an Australian Dollar Hedged basis, index: MSCI ACWI hedged into AUD (with net dividends reinvested)
4 Nikkei 225 index (in local currency terms) Source: Morningstar
5 S&P/ASX 300
6 Bloomberg
7 Bloomberg
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