The 2024 season is coming to an end. What an eventful year it has been: the Magnificent 7 rally, the halving, Tesla’s (NASDAQ: ) Cybercab reveal, geopolitical tensions and the US election. Here are ten stories to remember.
Story 1: Soft Landing Secured?
A soft landing, marked by easing inflation and declining interest rates, remains the baseline scenario for major economies. However, while disinflation has been a consistent trend throughout the year, recent data reveals inflationary pressures may persist longer than anticipated. In October, US headline was 2.6%, near pre-pandemic levels, while reached 3.3%, and the Fed’s preferred hit 2.8%, the highest since April. In Europe, euro area rose to 2.0% in October, up from 1.7% in September. In comparison, the rate stood at 2.9% in the same period last year.
Progress in disinflation has allowed central banks to adopt a more neutral policy stance following aggressive rate hikes in 2022 and 2023. Throughout 2024, central banks initiated rate cuts to support economic activity. The SNB led with three cuts, reducing its policy rate to 1%, with another 25-basis-point cut expected in December. The Fed, taking a more cautious approach, started easing in September with a 50-basis-point cut, followed by 25 basis points in November, bringing rates to 4.75%, with another cut likely in December. The ECB also reduced rates three times since June, lowering its policy rate to 3.25% by October, while the BoE cut rates twice, setting its benchmark at 4.75%.
Unlike other major central banks, the Bank of Japan (BOJ) diverged from the global trend of monetary easing by tightening its policy. In March, the BOJ ended its negative interest rate era with a 10-basis-point hike, its first increase in 17 years, followed by another hike to 0.25% in July.
These moves aimed to support a weakened amid concerns about inflation. Speculation of a December hike to 0.5% has recently strengthened the yen, which had previously declined against the .
Source: Statista
Story 2: US Resilience vs. Europe Struggles
The US economy showed resilience, with a healthy 2.8% annualised GDP growth in Q3, and is expected to end up slightly below 3% in 2024, driven by robust consumer spending and increased exports. Advancements in artificial intelligence also contributed to the US economic momentum, by enhancing productivity across sectors.
In contrast, Europe faced intensified economic headwinds. After a near recession in 2023, economic growth had resumed in early 2024 with a pickup in household consumption and exports. Unfortunately, this encouraging dynamic has rapidly lost momentum. The Eurozone’s third-quarter showed a modest 0.4% growth, exceeding the 0.2% forecast and most economic indicators have disappointed expectations. This is due to a succession of adverse developments since 2022: sanctions against Russia following Ukraine’s invasion, the ensuing cut from Russian gas supply, weaker Chinese demand for manufactured goods, a surge in inflation and the subsequent sharp rise in interest rates. These factors have affected Germany most, due to the structure of its economy. Meanwhile, France is grappling with political paralysis and budget deficit challenges.
Southern European economies have been less affected by recent challenges, benefiting from resilient service demand, particularly tourism.
In 2024, their growth and economic sentiment have trended positively, a stark reversal from a decade ago when ‘peripheral’ economies faced deep recessions while ‘core’ economies drove European growth.
Source: Augur Labs Infinity
Story 3: Global Debt Has Reached Unprecedented Levels
Global debt increased by over $12 trillion in the first three quarters of 2024, reaching a record $322.9 trillion. The global debt-to-GDP ratio fell to 326%, about 30 percentage points below the 2021 record but remains above pre-pandemic levels. The US budget deficit expanded to $1.8 trillion in fiscal year 2024. marking the highest level outside the COVID-19 era.
Since the “end” of the debt ceiling crisis in June 2023, total US debt has increased by $4 trillion. In other words, the US has taken on an average of $235 billion in debt per month, or $8 billion per day, since June 2023. This surge was driven by federal debt interest payments, alongside increased spending on Social Security, health care, and the military.
Source: Global Markets Investors
Story 4: France’s Turmoil
In France, the “Olympic” effect that had supported activity in August has quickly faded away. The country’s state budget deficit has ballooned to €173.8 billion. After a concerning deterioration of public deficits in the past few years, France has no choice but to draw up an “austerity” budget for next year, that will have to be adopted via a special procedure given the lack of majority in Parliament for the government. Far from being a stimulus, fiscal policy will be a headwind for growth in France in 2025.
In May, S&P downgraded France’s credit rating from AA to AA-. Later in October, Fitch and Moody’s revised France’s credit outlook to negative. The yield on France’s benchmark sovereign bond, long considered among the safest in the Eurozone, reached the same level as Greece’s for the first time in history. Adding to the challenges, the recent resignation of Prime Minister Michel Barnier following a no-confidence vote has deepened the French political instability.
Source: Reuters
Story 5: China’s Year of the Dragon
In China, the government unleashed a
10 Financial Stories That Shaped 2024 and Set the Stage for 2025
