2024 was the year of political shake ups with 4.4 billion people voting in 75+ countries. In the US, perhaps a surprising result with Donald Trump winning in a landslide (predicted by the bookies but not the media), with an agenda of reform to business regulation, tax, healthcare and wind-back of Government agencies. In the lead up to the election, many speculated the market was headed south. The opposite resulted. The key issues which seem common to Australia include: rapid rises in the cost of living, law and order and immigration with the big spending governments facing into higher deficits and debt.
Meanwhile equity markets, Gold and Bitcoin continue to push new highs with the S&P500 (US) up 33%, Bitcoin up 160% and ASX300 (Australia) up 20% in 2024 to date. The key driver in listed markets continues to be technology businesses driven by Artificial Intelligence (AI) rapidly reshaping how business is conducted – think online shopping via targeted personal messages (eg Flybuys emails, Facebook pop-ups, etc), utilities, banks and insurance companies. Unlike the dot.com boom bust in early 2000, this time companies like Microsoft, Amazon and Alphabet are capturing an economic share of the value they create through efficiencies like replacing significant numbers of humans who previously worked in call centres answering common queries. Some are describing the rapid pace of this change as the start of the next industrial revolution, where the advancements are running well ahead of Government policy. Driverless cars also seem closer to reality in US.
Notwithstanding the strong results, sentiment can, and often changes quickly. The last downturn was a few months ago in August 2024 with a 10% correction, and news headlines flashed doom and gloom, but like most things we know “this too shall pass” and as we approach the 5th anniversary of COVID lockdowns early in the new year.
A highly respected investment manager recently reminded us, one of the most critical investment decisions that investors make is to embrace the power of compound interest as the eighth wonder of the world and “earn it” or stand in the way and “pay it”.
Over the last 23 years we have observed the fact that more money is lost attempting to time and predict market movements rather than maintaining a well thought out strategy and a level head, largely ignoring the emotionally charged media headlines.