The market at a glance: Changes
Happy New Year! We wish you success in 2025, hoping the markets continue to offer opportunities as abundant as last year’s gains.
Now, to our analysis: December was a month of unexpected shifts. Following a year marked by significant growth, a dramatic move by the Swiss National Bank, reducing interest rates by twice what was anticipated, reshaped the financial landscape.
Interested to understand more? Here we go:
The market at a glance: Changes
Song of the month: “Changes" by David Bowie
As David Bowie sang in "Changes", "Turn and face the strange..." The close of 2024, filled with market surprises, invites us to embrace the uncertainties of 2025 with resilience and curiosity.
December and early 2025 brought not only seasonal treats but also unexpected twists in equity, bond, and commodity markets. As we turn the page on 2024, Bowie’s words resonate: "Time may change me, but I can't trace time."
With big changes and uncertainties ahead, 2025 also holds opportunities for those ready to face the challenges. It’s time to embrace the "Changes."
Key takeaways
2024 was a strong year for investors, despite a turbulent December and start to 2025. Should this be seen as a trend?
Equity markets were volatile: U.S. markets hit new highs before tumbling, Europe faced deeper declines amid political crises, and Asia remained on standby.
Bond markets reacted sharply to the SNB's unexpected 50 bps rate cut and the Fed’s revised 2025 forecast for only two rate reductions.
Commodities continued to decline, pressured by weak manufacturing demand in Europe, lower global oil demand forecasts, a stronger dollar, and geopolitical uncertainties.
Cryptocurrencies saw sharp volatility: Bitcoin hit an all-time high before correcting.
What happened with equities
In 2024, the U.S. not only aimed for the moon with its space exploration but also propelled its stock market to stellar heights. The S&P 500 rose over 25% this year, far above its historical average of 10-11%. With gains in 9 of 12 months, 2024 was truly exceptional.
Elsewhere, Japan’s stock market broke a 35-year record, while European and Swiss markets delivered more modest returns (+9% and +7.5%, respectively), exceeding historical averages.
In contrast, Chinese markets lagged, with investors remaining cautious despite some signs of economic recovery.
Why the surge?
The "Magnificent Seven": Seven tech giants—Apple (+30%), Amazon (+44%), Alphabet (+36%), Microsoft (+12%), Meta (+66%), Nvidia (+171%), and Tesla (+62%)—drove 50% of the S&P 500's growth. Fuelled by the AI revolution, these companies now account for nearly a third of the index, with $240 billion invested in AI this year, equivalent to 27% of Switzerland's GDP.
Trump Effect: Donald Trump’s return to power brought optimism, with promises of tax cuts, reduced tariffs, deregulation, and support for innovation—dubbed "Trump trades."
However, December disrupted the euphoria. The Fed reduced its forecasted 2025 rate cuts from 4 to 2, disappointing investors and dragging the year's final month into the red. In conclusion, December added contrast to an otherwise stellar 2024 for equities. 2025 promises fresh challenges ahead.
What happened with bonds
The Swiss National Bank (SNB) surprised markets with a 50 bps rate cut, double the expected 25 bps. This bold move raised questions and sent Swiss bond yields lower, especially for short-term maturities, with long-term rates like Confederation bonds dropping to 0.4%.
Across the Atlantic, the Federal Reserve adopted a cautious approach, cutting rates by 0.25% on December 18 and revising its 2025 outlook to just 2 cuts (down from 4).
Why the shift?
Despite recession fears, the U.S. economy remains resilient, with a strong labor market and steady consumer spending. The Fed is prioritising inflation control, even if it tempers market enthusiasm. Consequently, U.S. bond yields rose, with the 10-year yield reflecting higher long-term inflation and growth expectations.
Corporate high-yield bonds also saw activity in December. Central bank actions and Trump’s election boosted optimism, attracting investors seeking better yields.
In summary, December brought significant movements in bond markets, setting the stage for a dynamic 2025.
What happened with commodities, currencies, and digital assets
In the currency markets, the Swiss franc (CHF) wavered following the SNB's unexpected aggressive rate cut. This led to a brief period of weakness for the CHF, which quickly recovered thanks to an even weaker Euro and a U.S. dollar strengthened by a robust American economy. After these fluctuations, the EUR/CHF exchange rate stabilised at 0.93.
Cryptocurrencies, on the other hand, stole the spotlight in December. Bitcoin (BTC) soared past $108,268, fuelled by Donald Trump’s pro-Bitcoin policies and growing adoption by banks adding Bitcoin ETPs to their portfolios. True to its nature, BTC kept investors on edge, oscillating nervously between $90,000 and $105,000 throughout the month.
In the commodities market, the mood was more stable. Gold reaffirmed its status as a safe haven, exceeding $2,500 per ounce by the end of the year. Oil prices remained steady, with Brent crude hovering around $82 per barrel, balanced between solid demand and fears of an economic slowdown. Meanwhile, gas prices fell due to well-stocked reserves and a milder winter.
In the soft commodities market, cocoa made headlines by closing the year at $12,000 per ton, up from $4,000 at the start of the year. This surge was driven by limited harvests in West Africa and strong global demand during the holiday season. In Switzerland, a nation renowned for its chocolate, producers are grappling with rising costs, adjusting prices, and innovating to maintain their prestige. As a result, Swiss chocolate is becoming even more precious and luxurious.
December and early 2025 have been marked by heightened volatility. Should we see this as a trend for the year ahead? We remain optimistic about long-term prospects. Companies are holding steady, and economies are advancing, albeit slowly. Moreover, the varied impact on asset classes in 2024 provides fertile ground for diversified portfolios. As always, change doesn’t intimidate us—it inspires us.
Demystification room: True or False? Debunking 2 financial myths for 2025
As we step into 2025, it's crucial to challenge and overcome certain financial myths that might be holding you back. By addressing these misconceptions, we can pave the way for a more prosperous financial year.
Here are two pervasive myths that need debunking to help you optimise your financial strategy in 2025:
Myth 1: Negative interest rates won’t be back anytime soon
Negative interest rates left a bitter memory. Between 2015 and 2022, savings accounts yielded nothing, and some even had to pay banks to hold their deposits. Inflation brought that era to an end, briefly allowing decent returns on deposits.
But this reprieve may be short-lived.
In less than a year, the Swiss National Bank slashed rates from 1.75% to 0.5%, with banks following suit. Average savings rates, once 0.75% in early 2024, are now near zero. Could negative rates return?
“Nobody likes negative interest rates, not even the Swiss National Bank,” said SNB President Martin Schlegel. “But we’re ready to reintroduce them if necessary.”
One thing is clear: cash accounts won’t be the place to grow your wealth in 2025.
Myth 2: A good year for investment is always followed by a poor one
“What goes up must come down,” says the old adage.
While 2024 was a strong year for investments, should we brace for the worst in 2025? Without a crystal ball, we can turn to history to test this idea.
Examining the performance of a balanced CHF investment strategy over the past 24 years shows that a good year is rarely followed by a bad one. More often, it leads to another good year, reflecting the market's natural upward trajectory.
Source: Alpian. Balanced Strategy: PBI Fundo Mid Risk Index (composition: 50% equity and 50% bonds). Past performance is no guarantee of future results. Individual investment returns may differ due to a variety of factors, including, but not limited to, the date of investment and the investment strategy employed.
That said, past performance is no guarantee of future results, and downturns are an inevitable part of the investment journey. However, over time, investing has consistently proven to be a rewarding strategy.
Alpian: Kick off 2025 with a financial check-up
It's January, and like you, we're setting goals and tackling our New Year's resolutions. And let’s be honest, finances should be at the top of everyone’s list.
Did you know you can video-chat with a certified Alpian wealth advisor right from your phone, at no cost? Why not start the year with a financial check-up? They’re ready to offer you clear, unbiased guidance to help grow your wealth.