Farewell 2024, hello 2025
The Magnificent Seven (Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia and Tesla), which rose by an average 111 per cent over calendar 2023, continued the strong upward trajectory, increasing a further 63 per cent, on average, over calendar 2024.
In short, the average “Magnificent Seven” has turned $1.00 into $3.44 in two calendar years. The Magnificent Seven now have a combined market capitalisation of A$29 trillion, or 10 times the entire market capitalisation of the Australian All Ordinaries Index, which comprises our top 500 companies. Interestingly, on an individual basis, only two of the Magnificent Seven (Meta and Tesla) have a slightly smaller market capitalisation than the entire market capitalisation of the Australian All Ordinaries Index.
This performance helped drag up the Nasdaq, which jumped 9.0 per cent and 28.6 per cent for the 6 and 12 months to December 2024, respectively. The S&P 500 also did very well, up 23.3 per cent for the year to December 2024.
The downward trajectory of the U.S. annual rate of inflation, which slowed to 2.7 per cent in the year to November 2024, saw the U.S. Federal Reserve cut the U.S. cash rate on three occasions from mid-September, and by one whole percentage point to the current 4.25 to 4.50 per cent range. The excitement surrounding Artificial Intelligence, in conjunction with the Republican controlled Senate and House and the indication of Trump’s tariffs and tax cuts were taken positively by the U.S. market.
Other stock market indexes which performed well were the Japanese Nikkei 225 (+19.2 per cent) the German Dax 30 (+18.8 per cent). Given the recessionary conditions in Germany, particularly regarding the negative announcements from the German car industry, as well as the enormous increase in the cost of energy with cheap Russian gas off the agenda, this performance surprised many commentators.
Unsurprisingly, The International Energy Agency argues the competitiveness of European Union (EU) energy-intensive industries is expected to remain under pressure given electricity prices in the EU were almost double those in the United States and China. And without France’s net electricity exports of nuclear power, the price of electricity in the EU would be much higher.
The Hong Kong Hang Seng Index (+17.8 per cent), and the Chinese Shanghai Composite Index (+12.7 per cent) both did well, particularly over the December 2024 half-year.
The Australian All Ordinaries Index was up 7.5 per cent, excluding dividends, for a solid and close to an “average” year.
After breaching 5.0 per cent in October 2023, U.S. ten-year bonds declined to a 3.6 per cent yield by mid-September 2024. However, with the imminent easing of the U.S. cash rate by one percentage point and the state of the U.S. Budget Deficit — at 6.5 per cent of GDP for the year to September 2024 — and with the likelihood this will get somewhat worse as the interest expense on future deficits grows dramatically — U.S. ten year bonds sold off to breach 4.57 by year-end.
For the twelve months to December 2024, Gold rallied 27.3 per cent to US$2,639/oz. and with the weak Australian Dollar, the Aussie Gold producers are enjoying the record A$4,250/oz gold price. With the Chinese residential property sector crisis, including many property developers having entered administration, it was unsurprising to see iron-ore declining by 23.9 per cent to US$103.61/tonne. Without the additional expenditure from the Chinese infrastructure sector, it is likely the iron-ore price will come under further pressure, and the Australian Treasury is targeting US$77/tonne in Fiscal 2026.
On the currency front, the Australian dollar is under pressure, slipping to sub US$0.62, A$2.02 to the British pound, and A$1.67 to the Euro. The Reserve Bank of Australia’s Governor, Michele Bullock, must be frustrated with Australia’s stubbornly high rate of underlying inflation, the long-running cost of living and housing crisis, the record Government expenditure as a percentage of GDP, the seven consecutive quarters (to September 2024) of negative real GDP growth per capita, the abysmal productivity growth, and the “Big Australia” policy pursued by both sides of politics.
Whilst the one positive is our 4.0 per cent unemployment rate, any further depreciation of the Australian Dollar exchange rate will likely place increasing pressure on real consumer spending. If Australia ever follows New Zealand, where the average house price has declined by 15 per cent from its peak, and Wellington (-24 per cent) and Auckland (-20 per cent) have done much worse, then all levels of Government may receive a big reality check.
6 months and 12 month returns to 31 December 2024
| 31-Dec | 30-Jun | 31-Dec | 6 months to | 12 months to | |
| 2023 | 2024 | 2024 | 31-Dec-24 | 31-Dec-24 | |
| % Change | % Change | ||||
| Indices | |||||
| All Ordinaries | 7829.5 | 8013.8 | 8420.5 | 5.1% | 7.5% |
| S&P 500 | 4769.8 | 5460.5 | 5881.6 | 7.7% | 23.3% |
| Nasdaq | 15011.4 | 17723.8 | 19310.8 | 9.0% | 28.6% |
| Nikkei 225 | 33464.3 | 39557.5 | 39894.5 | 0.9% | 19.2% |
| FTSE 100 | 7733.2 | 8164.1 | 8173.0 | 0.1% | 5.7% |
| Dax 30 | 16751.6 | 18234.1 | 19909.1 | 9.2% | 18.8% |
| CAC 40 | 7543.2 | 7479.4 | 7380.7 | -1.3% | -2.2% |
| Shanghai Composite | 2974.9 | 2967.4 | 3351.8 | 13.0% | 12.7% |
| Hang Seng | 17023.0 | 17722.3 | 20060.0 | 13.2% | 17.8% |
| Sensex (India) | 72240.3 | 79032.7 | 78141.1 | -1.1% | 8.2% |
| NZ50 Gross | 11770.5 | 11717.4 | 13110.7 | 11.9% | 11.4% |
| Bonds | |||||
| U.S. 10 Year Bonds | 3.87% | 4.39% | 4.57% | 0.18% | 0.70% |
| German 10 Year Bunds | 2.02% | 2.49% | 2.36% | -0.13% | 0.34% |
| UK 10 Year Gilts | 3.56% | 4.21% | 4.57% | 0.36% | 1.01% |
| Japan 10 Year Bonds | 0.63% | 1.03% | 1.07% | 0.04% | 0.44% |
| Australian 10 Year Bonds | 3.96% | 4.35% | 4.41% | 0.06% | 0.45% |
| Australian 11am Call | 4.35% | 4.35% | 4.35% | 0.00% | 0.00% |
| Commodities | |||||
| Gold (US$/oz) | 2071.8 | 2336.9 | 2639.3 | 12.9% | 27.4% |
| Oil (US$/bbl) | 77.07 | 81.46 | 71.72 | -12.0% | -6.9% |
| Iron-ore (US$/tonne) | 136.16 | 105.60 | 103.61 | -1.9% | -23.9% |
| Copper (US$/lb) | 3.89 | 4.37 | 4.02 | -8.0% | 3.3% |
| Wheat (US$/bushel) | 6.28 | 5.75 | 5.51 | -4.2% | -12.3% |
| Currencies | |||||
| $US/$A | 0.68 | 0.67 | 0.62 | -7.5% | -8.8% |
| $A/GBP | 1.87 | 1.90 | 2.02 | 6.3% | 8.0% |
| $A/EUR | 1.62 | 1.61 | 1.67 | 3.7% | 3.1% |
| Yen/$A | 95.45 | 107.20 | 97.08 | -9.4% | 1.7% |
Chief Executive Officer of Montgomery Investment Management, David Buckland has over 30 years of industry experience. David is a deeply knowledgeable and highly experienced financial services executive. Prior to joining Montgomery in 2012, David was CEO and Executive Director of Hunter Hall for 11 years, as well as a Director at JP Morgan in Sydney and London for eight years.
This post was contributed by a representative of Montgomery Investment Management Pty Limited (AFSL No. 354564). The principal purpose of this post is to provide factual information and not provide financial product advice. Additionally, the information provided is not intended to provide any recommendation or opinion about any financial product. Any commentary and statements of opinion however may contain general advice only that is prepared without taking into account your personal objectives, financial circumstances or needs. Because of this, before acting on any of the information provided, you should always consider its appropriateness in light of your personal objectives, financial circumstances and needs and should consider seeking independent advice from a financial advisor if necessary before making any decisions. This post specifically excludes personal advice.
