It looks like you're located in United States. Please select your role or change location. highlight_off
Institutions / Consultants I consult or invest on behalf of Institutions chevron_right Intermediaries / Wealth Managers I invest on behalf of my clients. chevron_right

Wellington Homepage

Changechevron_right

Quarterly Market Review

Brett Hinds, Lead Client Services Writer
Jameson Dunn, Lead, Equity Product Reporting
January 2025
18 min read
2026-01-31
Archived info
Archived pieces remain available on the site. Please consider the publish date while reading these older pieces.
financial market review

The views expressed are those of the authors at the time of writing. Other teams may hold different views and make different investment decisions. The value of your investment may become worth more or less than at the time of original investment. While any third-party data used is considered reliable, its accuracy is not guaranteed. For professional, institutional, or accredited investors only.

Global equities (+1.4%) rose in the fourth quarter, closing the year with a substantial 20.7% gain year to date. Prospects for a soft landing remained intact as markets navigated central bank policy updates, heightened geopolitical risks, and political uncertainty. Donald Trump’s presidential reelection victory and the Republican Party’s sweep of both chambers of Congress bolstered expectations of deregulation, additional tax cuts, and a more accommodative US business environment, but Trump’s desire for a protectionist trade agenda unnerved global markets and could have far-reaching implications for foreign policy, inflation, and economic growth. Global economic data remained largely resilient, accompanied by measured inflation and a general decline in interest rates during the quarter. However, varying outlooks for economic growth and inflation among countries and regions caused global central bank policy expectations to diverge. The US Federal Reserve (Fed) pivoted toward more hawkish guidance, and the European Central Bank (ECB) signaled that interest rates will continue to decline. Eurozone business activity approached expansion in December, but the region’s manufacturing sector remained mired in a deep downturn. Germany’s government coalition collapsed, and François Bayrou was named the new prime minister of France after a no-confidence motion ousted Prime Minister Michel Barnier just three months into the new administration. Japan’s Liberal Democratic Party-led coalition lost its parliamentary majority in national elections, generating political and monetary policy uncertainty. Geopolitical risks remained heightened as the Russia/Ukraine war raged on, the war in the Middle East reached its one-year mark, and President Bashir Assad’s regime collapsed after rebels captured the Syrian capital, Damascus.

Global fixed income markets generated negative total returns during the fourth quarter, as measured by the Bloomberg Global Aggregate Index hedged to US dollars. Developed market sovereign yields ended broadly higher over the quarter, led by the US and UK. Commodities (+3.8%) advanced. Energy and agriculture & livestock contributed, while industrial metals & precious metals detracted.

Equities

United States

US equities (+2.4%) rose for the fifth consecutive quarter to register a stellar 25.0% return in 2024. Sizable gains from some mega-cap technology companies led growth stocks to significantly outperform their value counterparts in the quarter. Stocks rallied in November after Donald Trump won the presidential election and the balance of political power shifted to the Republican Party, cementing a path for Trump to enact major policy initiatives, including tax and spending cuts, deregulation, and nationalist trade policies. Data suggested that economic activity continued to expand at a solid pace in the fourth quarter after GDP grew at a stout 3.1% annualized pace in the third quarter, thanks to sturdy consumer spending. However, stocks slid in December after the Fed’s Summary of Economic Projections revealed a markedly more gradual and shallower path of interest-rate cuts due to concerns about upside inflation risks amid a resilient economy and uncertainty about the impact of tariffs and other policies promised by Trump. The Fed’s median projection signaled 50 basis points (bps) of rate cuts in 2025, significantly less than the 100 bps projected in September. Corporate earnings were stronger than expected; according to FactSet, third-quarter earnings for companies in the S&P 500 Index grew 5.8% year over year, above the 4.2% estimate on September 30. Expectations for the fourth quarter are significantly better, with analysts forecasting earnings growth of 11.9% year over year.

Economic data released during the quarter indicated that the economy remained healthy. The labor market stayed firm overall but gradually moderated. In November, nonfarm payrolls grew by a solid 227,000, unemployment edged higher to 4.2%, and continuing jobless claims rose to their highest level in more than three years. Consumers continued to spend at a solid pace, underscoring the economy’s enduring strength. Retail sales in November increased at a larger-than-expected 0.7% month on month, and personal spending rose 0.4% (slightly below expectations) after a 0.3% gain in October. The Conference Board’s Consumer Confidence Index surged to its highest level in more than a year before pulling back in December amid fears that higher tariffs could increase goods prices. Data for pending, new-, and existing-home sales improved in November even as affordability remained strained by high home prices and a renewed increase in mortgage rates, which are anticipated to remain elevated for longer than previously expected. The NFIB Small Business Optimism Index surged to the highest level in more than three years in anticipation of more favorable economic policies under President-elect Trump. Manufacturing continued to contract over the quarter but approached expansion in December, while accelerating growth in services drove the S&P Global Flash Composite Purchasing Managers’ Index (PMI) to a 33-month high in December.

Within the S&P 500 Index (+2.4%), four of the 11 sectors posted positive results for the quarter. Consumer discretionary (+14.3%) was the best-performing sector, as automobiles (+49.2%) and broadline retail (+17.4%) contributed to the sector. Communication services (+8.9%) and financials (+7.1%) also outperformed. Materials (-12.4%) was the worst-performing sector. Health care (-10.3%) underperformed, led lower by health care providers & services (-14.7%) and pharmaceuticals (-9.9%). Real estate (-7.9%) and utilities (-5.5%) also underperformed.

Europe

European equities (-2.8%) declined in the fourth quarter. The eurozone economy expanded by 0.4% in the third quarter, beating expectations of 0.2%. However, the economic outlook for 2025 is clouded by structural challenges in the industrial sector, potentially higher tariffs from the US, and slowing Chinese demand. The HCOB Flash Eurozone Composite PMI indicated that eurozone business activity approached expansion in December, as growth in services activity offset weakness in manufacturing. Business activity in the region was largely weighed down by Germany and France, where the rates of decline eased only slightly from November. Although the labor market remained healthy amid record-low unemployment of 6.3% in October, employment in December fell at the fastest pace in four years as companies responded to a drop in workloads. Job losses were exclusively driven by the manufacturing sector. Against a backdrop of lackluster economic growth and an increasingly uncertain outlook, the ECB marked a significant policy shift by implementing a third consecutive rate cut and notably removing language from its policy statement about keeping interest rates restrictive. ECB President Christine Lagarde signaled that the bank’s focus would pivot from inflation control to addressing economic growth risks, with eurozone core inflation remaining stable at 2.7% during the quarter. Third-quarter earnings for companies in the STOXX 600 Index are forecast to increase 7.8% from a year earlier, according to LSEG.

Europe’s manufacturing sector deteriorated at a faster pace in December; the HCOB Eurozone Manufacturing PMI fell further into contractionary territory amid accelerated contractions in new orders, output, purchasing activity, and inventories. Input costs were unchanged for the first time since August, and output prices continued to fall. Encouragingly, business confidence improved modestly as growth expectations hit a four-month high. The HCOB Flash Eurozone Composite PMI revealed that services sector activity registered modest growth in December, marking the first monthly expansion since August. Concerningly, input costs and output prices rose at an accelerated rate, likely due to higher wages.

Deepening political upheaval continued to disrupt the eurozone’s most powerful countries (Germany and France) at a time of mounting economic and security uncertainty. Germany (+1.6%) faces early elections in February after Chancellor Olaf Scholz lost a vote of confidence. The ZEW Indicator of Economic Sentiment increased significantly during the quarter thanks to falling interest rates and expectations of more accommodative economic policies; however, the assessment of the current economic situation continued to worsen. The UK’s (-0.2%) economy unexpectedly shrank 0.1% in October — the second consecutive monthly contraction — while Chancellor Rachel Reeves unveiled an expansionary budget that markets judged to be inflationary. The S&P Global Flash UK PMI Composite Output Index showed that business activity increased marginally in December, yet employment declined at the fastest pace since January 2021. In France (-3.2%), President Emmanuel Macron elected longtime ally François Bayrou as prime minister in a bid to stabilize the political turmoil after the collapse of Michel Barnier’s government.

Pacific Basin

Pacific Basin equities (+3.6%) rose over the quarter. In Australia (-0.7%), the Reserve Bank of Australia (RBA) faced tepid economic growth, which contrasted with stubborn core inflation and a tight labor market. GDP rose only 0.8% in the third quarter compared to a year ago, and excluding the pandemic period, at the lowest rate since 1991. As expected, the RBA left its cash rate at 4.35% amid sticky core inflation. However, policymakers adopted a dovish tone, indicating greater confidence that some of the upside risks to inflation have eased. Still, a key measure of core inflation (trimmed mean inflation) accelerated 3.5% annually in October after declining to nearly a two-year low of 3.2% in September. Slower wage growth in the third quarter reflected some easing price pressures, although stronger-than-expected job growth in November and an unexpected drop in the unemployment rate to 3.9% underscored the resilience of the labor market and prompted traders to pare back the probability of a February interest-rate cut. Australia’s Senate approved an overhaul of the RBA that will split the bank’s board in two, a monetary policy committee and a board that manages the central bank’s operations.

In Japan (+5.9%), accelerating inflation did not spur the Bank of Japan (BOJ) to raise interest rates in December, although hawkish comments signaled the potential for a rate hike in January. Inflation was largely driven by rising energy prices after the government phased out subsidies for gas and electricity bills. In November, Japanese core consumer prices excluding fresh food accelerated 2.7% from a year earlier. The same measure accelerated 2.4% in Tokyo in December. In November, Japan’s cabinet approved a new stimulus package worth ¥21.9 trillion (US$141.71 billion) to ease rising living costs and promote business innovation and investment. Japan’s economy slowed to an annualized pace of 1.2% in the third quarter from 2.2% in the previous quarter. The BOJ’s Tankan survey indicated that business confidence among Japan’s largest service providers and manufacturers remained upbeat in December. This was a positive sign for the BOJ as it evaluates whether wage increases are solidifying at a level that sustains inflation and justifies higher interest rates. Japan faces a turbulent political landscape after the Liberal Democratic Party’s ruling coalition lost its parliamentary majority in a snap election.

In Singapore (+8.6%), core inflation declined to a three-year low of 1.9% year over year in November, and economic growth beat estimates in the fourth quarter, potentially opening the door for more accommodative monetary policy in 2025. A preliminary estimate showed that GDP grew 4.3% year over year in the fourth quarter, well above estimates of a 3.8% gain but lower than the third quarter’s reading of 5.4%. Nevertheless, the government expressed caution about the outlook for 2025 due to the risks of potential US tariffs. New Zealand (+6.8%) fell back into recession after third-quarter GDP declined at a surprisingly sharp 1.0% quarterly pace, increasing pressure on the central bank to reduce interest rates more aggressively.

Emerging Markets

Emerging markets (EM) equities (-4.2%) fell in the fourth quarter. Latin America led the decline, followed by Asia and Europe, the Middle East, and Africa (EMEA).

In Latin America (-7.8%), Brazil’s (-10.0%) central bank raised interest rates by 50 bps in November, and 100 bps in December, signaling 100 bps hikes at each of its next two meetings in an effort to slow rising inflation. The Brazilian real fell to historic lows and stocks plummeted amid concerns that a proposed tax and spending package will not sufficiently curb the nominal deficit, which climbed to 9.5% of GDP. Mexico (-5.0%) declined as Donald Trump threatened 25% tariffs on the country. A steady decline in core inflation spurred the central bank to lower interest rates by 50 bps during the quarter, with the bank signaling more cuts ahead. In Peru (-9.1%), annual inflation accelerated to a five-month high of 2.27% in November, but the central bank kept its key interest rate at 5% in December as inflation remained within the bank’s target range.

In Asia (-4.5%), the possibility of higher US tariffs loomed over the region’s economies. China’s (-7.0%) government unveiled numerous stimulus measures to aid the economy and signaled more proactive fiscal policy and easier monetary policy in 2025, including a bigger budget deficit, greater borrowing, and lower interest rates. The property market showed signs of stabilizing as home prices fell only 0.1% in November, the smallest decline in 17 months. South Korea’s (-9.0%) President Yoon Suk Yeol was impeached after he imposed, then revoked, martial law. The central bank announced measures to boost short-term liquidity and provide special loans if needed to stabilize the economy after downgrading its economic growth forecasts for 2024 and 2025. India’s (-8.7%) central bank lowered its GDP growth forecast for fiscal year 2025 to 6.6%, from its previous projection of 7.2% in October, and reduced the cash reserve ratio by 50 bps to bolster liquidity in the economy. Retail inflation eased in November after surging to a 14-month high in October. Taiwan’s (+7.1%) exports rose by a larger-than-expected 9.7% year over year in November, thanks to strong demand for AI-related products. The central bank raised its 2024 economic growth forecast to 4.25%, from its previous projection of 3.82% in September.

In EMEA (-0.4%), OPEC+ delayed its oil output hike until April and extended the full unwinding of production cuts until the end of 2026. Saudi Arabia (-1.3%) announced plans to cut spending in 2025 due to budget strains from falling oil prices, although non-oil business activity hit a 16-month high in November as the S&P Saudi Arabia PMI rose for the fourth consecutive month. The central bank lowered interest rates by 25 bps, to 5%. South Africa’s (-3.6%) economic output unexpectedly fell 0.3% in the third quarter, with droughts weighing on agricultural production. Interest rates were cut by 25 bps, to 7.75%, as inflation slowed. The United Arab Emirates (+9.0%) announced plans to reduce oil shipments in 2025.

Fixed Income

Global fixed income markets generated negative total returns during the fourth quarter, as measured by the Bloomberg Global Aggregate Index hedged to US dollars. US elections and the Fed’s decisions and policy expectations were the primary drivers of market movement. The Republican sweep of both houses of Congress in November resulted in a positive shift in sentiment for risk assets. However, it also played a major part in stoking concerns about inflation, growth, and fiscal sustainability, causing a broad-based sell-off across the global bond market. Spread sectors generally outperformed government bonds amid mixed spread movements. The US dollar gained versus most currencies.

Global economic data varied during the quarter. Progress on inflation appeared to stall for many major economies, although divergence remained. The US economy expanded at a faster-than-expected pace in the third quarter, boosted by strong consumer spending and export growth, while inflation accelerated, driven by rising shelter costs. Eurozone headline inflation moved higher, while unemployment remained at record lows across most countries. The UK’s inflation hit an eight-month high but the rise in services prices held steady, offering the Bank of England (BOE) a little relief. New Zealand’s and Australia’s third-quarter GDP growth fell short of market expectations. Japan’s inflation accelerated on reduced energy subsidies. In China, consumer prices dropped to a five-month low, while producer price deflation also deepened. Manufacturing and services PMIs increased to expansionary territory.

Developed market sovereign yields ended broadly higher in the fourth quarter, led by the US and the UK. Outside of Europe, investors pared expectations for interest-rate cuts following slow progress on bringing inflation back to central banks’ targets. The path to policy normalization continued to vary across countries and regions. According to market pricing, the Fed and BOE are expected to cut interest rates by about 50 bps by the end of 2025, while the ECB still wrestled with sluggish growth and the risk that inflation undershoots its target. The Bank of Canada and Swiss National Bank delivered large rate cuts, while Norway’s Norges Bank left policy unchanged, projecting fewer rate cuts in 2025. The BOJ elected to skip a rate hike as policymakers preferred to tread cautiously amid uncertainty about Trump’s economic plans. In EM, central banks’ easing cycles also diverged. Brazil’s central bank raised rates by a greater-than-expected 100 bps in December and warned of further increases if inflation expectations worsen.

Currencies

The US dollar appreciated against other currencies in the fourth quarter on expectations that the incoming US administration’s policies will boost economic growth and lift inflation. Within the G10, the New Zealand dollar, Australian dollar, and Japanese yen were notable underperformers. China’s manufacturing slowdown further weighed on the currencies of New Zealand and Australia due to the close economic ties between both countries and China. The Japanese yen weakened to a five-month low to finish the year as one of the worst-performing developed market currencies, alongside the New Zealand dollar. Performance was broadly negative across EM, with the Brazilian real, South Korean won, and South African rand leading the losses. The Brazilian real fell to an all-time low as the central bank’s latest foreign exchange intervention failed to calm investors’ concerns about surging government spending, which is likely pushing up inflation expectations. The South Korean won dropped to a 15-year low on the Fed’s hawkish interest-rate cut and domestic political uncertainty.

Commodities

Energy (+7.5%) rallied during the period. Crude oil (+7.5%), heating oil (+7.5%), gasoline (+7.1%), and gas oil (+6.8%) surged amid concerns about potential production disruptions due to geopolitical strife, alongside a delayed increase in oil output by OPEC+, declining stockpiles, and strong demand in the US. Oil prices were also buoyed by colder weather, which increased the demand for diesel fuel as an alternative to natural gas. Additionally, China’s decision to raise the import quota for its private refiners could further boost oil demand. Natural gas (+5.9%) surged due to a number of factors. The US Energy Information Administration highlighted a tighter global market heading into the winter, while limited growth in liquefied natural gas (LNG) supply, changes in pipeline flows due to the expiring Russia-Ukraine transit contract, and operational issues at LNG export facilities constrained supply. Colder weather forecasts and problems with electricity power generation also bolstered demand for LNG. Persistently strong demand from LNG export facilities and output cuts in the North Sea also supported natural gas prices.

Industrial metals (-7.5%) fell as nickel (-12.9%), copper (-11.1%), lead (-7.2%), zinc (-3.2%), and aluminum (-2.6%) ended the period lower. The US dollar strengthened following the Fed’s December rate cut and expectations for a slower pace of policy easing in 2025, making metals more expensive for international buyers. A seasonal slowdown in industrial activity also weighed on metal prices.

Precious metals (-1.1%) ended lower. Silver (-7.3%) and gold (-0.5%) declined following Trump’s victory in the US presidential election, as his plans for tariffs and immigration policies could reignite inflation. Additionally, the Fed’s interest-rate cut in December came with expectations of a markedly slower pace of policy easing in 2025, strengthening the dollar and boosting bond yields.

Agriculture & livestock (+3.1%) rose. Cocoa (+56.4%) soared to a record high at the end of 2024 due to persistent supply concerns caused by adverse weather in West Africa, which accounts for roughly 75% of cocoa production. Furthermore, the International Cocoa Organization noted that the global cocoa market in 2023 – 2024 registered its largest deficit in over six decades due to crop failures in Côte d’Ivoire and Ghana. Coffee (+19.9%) surged due to a severe drought in Brazil earlier this year, which greatly reduced output. Recent heavy rains in Vietnam worsened harvesting conditions, further suppressing the global coffee supply. Feeder cattle (+9.9%) rallied following news that Mexican cattle imports might be restricted after a cow in Chiapas was discovered to be infested with the New World screwworm. An improved supply outlook, ample inventory, and a strong US dollar weighed on wheat (-6.6%), cotton (-9.1%), and sugar (-13.3%). Additionally, the Indian government may permit sugar exports if domestic ethanol blending requirements are met, which could further bolster the global sugar supply.

monthly market snapshot 2024
em-evolution-new-paths-in-equity-portfolio-construction-fig8

Experts

Related insights

Showing 7 of 7 Insights Posts
Archived info
Archived pieces remain available on the site. Please consider the publish date while reading these older pieces.

Fed in holding pattern

Continue reading
event January 2025
3 min
Article
2026-02-28
Archived info
Archived pieces remain available on the site. Please consider the publish date while reading these older pieces.
Archived info
Archived pieces remain available on the site. Please consider the publish date while reading these older pieces.

Emerging markets under Trump 2.0: expect the unexpected

Continue reading
event January 2025
5 min
Article
2026-01-31
Archived info
Archived pieces remain available on the site. Please consider the publish date while reading these older pieces.
Archived info
Archived pieces remain available on the site. Please consider the publish date while reading these older pieces.

Venture capital roundtable: 2025 outlook

Continue reading
event January 2025
18 min
Video
2026-01-31
Archived info
Archived pieces remain available on the site. Please consider the publish date while reading these older pieces.
Archived info
Archived pieces remain available on the site. Please consider the publish date while reading these older pieces.

Flexibility with focus: how to position fixed income for volatility

Continue reading
event January 2025
7 min
Article
2026-01-31
Archived info
Archived pieces remain available on the site. Please consider the publish date while reading these older pieces.
Archived info
Archived pieces remain available on the site. Please consider the publish date while reading these older pieces.

Private market perspectives

Continue reading
event January 2025
5 min
Video
2026-01-28
Archived info
Archived pieces remain available on the site. Please consider the publish date while reading these older pieces.
Archived info
Archived pieces remain available on the site. Please consider the publish date while reading these older pieces.

Europe amid regime change: where next for European equities?

Continue reading
event January 2025
6 min
Article
2026-02-28
Archived info
Archived pieces remain available on the site. Please consider the publish date while reading these older pieces.
Archived info
Archived pieces remain available on the site. Please consider the publish date while reading these older pieces.

What an “America first” foreign policy may mean for markets

Continue reading
event January 2025
6 min
Article
2026-01-31
Archived info
Archived pieces remain available on the site. Please consider the publish date while reading these older pieces.

Read next