Market Update: 30th December 2024

What happened in 2024 and what is to come in 2025?

Quite a poor year from the UK in terms of economic growth, inflation management and policy setting. Not the best of starts for the new Labour Government. Rachel Reeves, the Chancellor of the Exchequer, has not stopped popping up in the headlines as concerns grow over her plans for growth. Looking ahead to 2025 the UK will need to find new innovative paths to growing the currently flatlining economy, whilst keeping a lid on inflation, which remains above the Bank of England’s target of 2.0%.

A lot of political instability across Europe has taken place over the past year, with the EU seemingly never agreeing on how to tackle the main issues they face, such as debt control, inflation management and global conflict. With France in its current political stalemate, and Germany’s snap election set for February, all eyes will be on how the EU’s largest member states hold up in the new year. Despite these political setbacks, overall the EU economy has been performing relatively well, with the ECB monetary policy getting inflation under control.

Quite a strong year for the US by comparison to other major economies, with economic growth well above 2.0%, and inflation falling at a healthy rate. The Federal Reserve has cut interest rates at a steady pace, which is expected to continue into 2025. The US Dollar has continued to strengthen against its main basket of traded currencies, with the US Dollar Index nearing a mutli-decade high. It currently sits at 108, not far from the 112 multi-decade high seen a few years ago. With Trump now getting into the swing of things, global economists will be watching the US in 2025 to gain an idea of how the global economy will perform.

A big year ahead for Argentina, with the new President Javier Milei’s economic policies already having significant impacts on the nation's economy. Adjusting for inflation (in real terms), the Peso has made significant gains against many of its mainly traded currencies. However this has caused domestic price rises which economists have warned could harm any gains made.

Africa’s biggest economy, South Africa, faces several economic challenges in the coming year. Economic growth slowed in 2024 due to energy constraints, global economic factors, and logistical bottlenecks. Unemployment remains high, particularly among youth, despite some job recovery. The new Government faces the challenge of implementing reforms to address these issues, including improving energy supply, enhancing infrastructure, and creating more jobs. Despite these constraints, by comparison to other developing countries currency, the South African Rand has remained relatively stable overall against the US Dollar. The USD/ZAR rate has been bouncing between 17 and 19 over the past year, with the rate being at the higher end of this at the moment.

2024 China has been a transitional year for China, with it still holding strong on the global stage, however facing some serious domestic issues. A significant decline in domestic consumer spending has caused shocks to many sectors, with the Chinese Government introducing new and improved policies such as reformed unemployment benefits in an attempt to prop this up. Despite these set-backs, the Chinese economy has grown at a much higher rate than all developed countries across the west, with GDP growth for 2024 expected to be at around 5.0%. The America First agenda will be watched by China’s policymakers to see how Trump’s supposed tariffs are implemented, with China currently being their main target.

Another tough year for Japan, with its economy doing relatively well, however its currency taking more punches with it now sitting at multi-decade lows against its main traded currency partner the US Dollar. Trump’s policies will have a significant impact on the Japanese economy, not just in terms of currency movement but also in actual trade in goods and services, with Japanese exports to the US totalling around $150bn per year. Any tariffs on Japanese goods will have a significant impact on their economy.

What to watch out for this coming week?

• US Initial Jobless Claims (02/01) - Employment data from the US will show the number of people submitting their initial application for unemployment support over the Christmas period.
• US Manufacturing PMI (03/12) - Manufacturing price and supply data for December to be released, expected to show contraction in manufacturing however an increase in prices.

That's all for this year. See you 2025!