December wrapped up a strong year for global markets with notable winners like US equities and gold. Local markets saw mixed performance, with financials leading gains but resources struggling due to reduced Chinese demand. Chief Investment Officer Duane Gilbert shares his bullish 2025 outlook.
Global Markets
December was a rather uneventful month, and a weak finish to a strong year. Developed market equities ended the month down 2.6% but delivered an incredible 19.2% for the year. Gains were largely driven by US tech stocks, which benefitted from the rollout of new products and services powered AI technology, while the broader US market benefited from falling interest rates.
US markets ended the year up 25.1%. The magnificent "Magnificent Seven" - Apple, Nvidia, Microsoft, Amazon, Alphabet, Meta Platforms, and Tesla – ended the year up 63% on average. Two years ago, these companies accounted for 20% of the US market. They now account for one-third of the US market. In contrast, European equities delivered 2.4% for the year. Europe is becoming increasingly un-investable as a result of poor growth, poor fiscal positions, increasing unfunded liabilities and, more recently, political turmoil. Investment capital as well as company listing are increasingly moving to the US. Japanese equities ended the year up 8.7% and Emerging markets ended the year up 7.5%.
Chart 1: listed companies are increasingly moving to the US (Source: Apollo Global Management)
Gold was a standout performer in 2024 – up 27%. The underpin for the gold price has been increase buying from central banks (China and Russia in particular) following US sanctions on Russia. The BRICS nations are looking to get off the dollar standard and towards a currency, backed by gold and possibly other commodities. The original BRICS members were Brazil, Russia, India, and China. South Africa joined in 2010. Egypt, Ethiopia, Iran, and the United Arab Emirates joined in 2024. In December, President Elect Donald Trump warned that he would impose a 100% tariff on imports from BRICS nations if they pursue creating a new currency.
Chart 2: Gold vs real yields (Source: Long term trends)
Fixed income markets continued remaining under pressure in December. The US Fed cut interest rates by 0.25% as expected but reduced its projected future interest rate cuts by 0.50%, signalling a more hawkish stance on its easing cycle. These progressively hawkish statements from the Fed have caused US bond yields and the dollar to rise since September 2024.
Charts 3+4: US 10-year bond yields and US Dollar Index (Source: TradingEconomics)
Local Markets
Local equities were down 0.49% during the month of December and ended the year up 9.4%. However, the headline number masks a lot of variability in the underlying sector performance. The Financials index ended the year up 21.6%, benefitting from foreign demand for “SA Inc” businesses during quarter 4 while the Industrial Index ended the year up 17.3%. In contrast, the Resources Index ended the year down 7.2% as a result of reduced commodity demand from China. As we’ve discussed in numerous commentaries over the year, Chinese authorities have clamped down on debt fuelled property development over the past few years - a sharp turnaround from their previous strategy of encouraging property companies to build in order to create jobs. This has far-reaching implications for commodity exporting countries like South Africa.
Mining contributes to economic growth, job creation, tax revenue and currency demand. For the time being, there is no evidence that Chinese authorities have a desire to stimulate demand again. In fact, 2025 started on a sour note, with ArcelorMittal closing their steel plants in Newcastle, KZN, resulting in 3500 direct job losses and an estimated 20,000 to 25,000 of second-round job losses.
This is a direct result of reduced demand from China. We may see similar headlines for other resource counters during the course of 2025. SA Bonds ended the year up 17.3%, also benefitting from foreign demand, while the ZAR lost 3.2% to the dollar.
Chart5 : SA bond yields vs US Bond Yields – impact of foreign demand (Source: Bloomberg)
Chief Investment Officer, Duane Gilbert’s commentary
Our market outlook for 2025 is bullish. Falling interest rates (globally) in a non-recessionary environment will be supportive of equity markets. Bond yields remain under pressure as investors rotate their portfolios into equities. The US remains our destination of choice – growth stocks and small caps in particular.
Growth rates in Europe, China and Japan continue to disappoint. Emerging markets, South Africa in particular, have been the flavour of the day for the past few months but this trend is reversing. We expect the rand to remain under pressure as our government continues to accumulate debt.
Furthermore, the dollar should remain strong with Trumps US focused policies and superior US Growth. South African equities are particularly cheap but vulnerable to global sentiment. One needs to carefully pick companies that can grow their earnings in a low growth environment. We maintain a low exposure to South African government bonds. We prefer exposure to high-quality secured credit. We maintain a modest cash position, which gives us the dry powder we need to take advantage of bargains that may arise from any market sell-off.
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Any opinions, news, research, reports, analyses, prices, or other information contained within this research is provided by an external contributor as general market commentary and does not constitute investment advice for the purposes of the Financial Advisory and Intermediary Services Act, 2002. First World Trader (Pty) Ltd t/a EasyEquities (“EasyEquities”) does not warrant the correctness, accuracy, timeliness, reliability or completeness of any information (i) contained within this research and (ii) received from third party data providers. You must rely solely upon your own judgment in all aspects of your investment and/or trading decisions and all investments and/or trades are made at your own risk. EasyEquities (including any of their employees) will not accept any liability for any direct or indirect loss or damage, including without limitation, any loss of profit, which may arise directly or indirectly from use of or reliance on the market commentary. The content contained within is subject to change at any time without notice.
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