Markets in 2024: Wall Avenue’s high-octane rally retains buyers captive to the US

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By Naomi Rovnick, Dhara Ranasinghe and Rodrigo Campos

LONDON (Reuters) – Markets that started the yr with buyers anticipating a world inventory rally to fizzle, swift U.S. rate of interest cuts to spice up Treasuries and soften the greenback and rising market currencies to strengthen have firmly defied that consensus.

World shares are set for a second consecutive annual achieve of greater than 17%, unfazed by wars within the Center East and Ukraine, Germany’s financial contraction and authorities collapse, French finances chaos and China’s slowdown.

That comes principally because of a second yr of giant features for Wall Avenue shares as synthetic intelligence fever and sturdy financial development sucked extra international capital into U.S. property and took the greenback up 7% in opposition to friends in 2024.

U.S. exuberance rose after Donald Trump’s Nov. 5 election win, as merchants centered on the President-elect’s plans for tax cuts and deregulation, with the surge in animal spirits propelling cryptocurrency bitcoin to a 128% annual achieve.

World markets enter 2025 more and more uncovered to U.S. developments – a threat issue that burst into life after the Federal Reserve roiled markets this month by pointing to fewer charge cuts within the yr forward.

That got here after weak U.S. jobs information and a shock midyear Japanese charge hike that pressured dollar-denominated property and despatched a volatility wrecking ball swinging by international markets and sparked a short-lived rout in August.

Debt buyers, in the meantime, are rising anxious about Trump’s proposed commerce tariffs refueling inflation and concern extreme White Home borrowing that might roil the $28 trillion Treasury market and spark wider authorities bond disruption.

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“It will be troublesome, within the occasion of a (U.S.) pullback, to search out anyplace to cover,” Barclays personal financial institution chief market strategist Julien Lafargue stated.

WALL STREET JUGGERNAUTS

Wall Avenue’s S&P 500 share index is 24% increased this yr after an analogous bounce final yr, in its strongest two-year streak since 1998.

Shares in synthetic intelligence chipmaker Nvidia rose 172% in 2024, Elon Musk’s carmaker Tesla gained 69% whereas buyers’ publicity to U.S. shares hit report ranges in December.

The mixed worth of the so-called Magnificent Seven U.S. tech shares accounts for round a fifth of MSCI’s world share index, in keeping with Schroders, elevating market menace ranges if their earnings or AI expertise disappoint.

EUROPE’S STRUGGLES

The euro slid round 5.5% in opposition to the greenback this yr whereas European shares carried out worse relative to their U.S. friends than they’ve in not less than 25 years.

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