Overall, 2024 was a fairly strong year for investors, with the US tech sector again dominating headlines and market returns. The Mag7 index returned +67.3%, making it a spectacular option for those willing to run a highly concentrated portfolio. The rest of the market attempted to rally alongside the tech titans numerous times throughout the year, particularly after the election of Donald Trump, which fuelled some short-lived investor optimism. However, returns on the NZX, ASX, FTSE, ESTOXX, and US small caps were relatively lacklustre in comparison, ranging from 5% to around 12%.

Inflation stubbornly made its way lower across the globe, finishing at 2.7% in the US, 2.6% in the UK, 2.9% in Japan, 2.8% in Australia, 2.5% in the EU, 0.2% in China, and 2.2% in New Zealand. While central banks remained concerned that strong growth in the US and risks around Trump’s policies might reignite inflation, interest rates appear set to decline again in 2025. A notable exception was Turkey, where inflation reached a staggering 47%!

Despite inflation falling into the 2% range globally, returns for bonds mainly came from yield and a compression of spreads, as interest rates remained high despite some modest cuts from central banks. US 10-year bond yields ended the year higher than they started, making it challenging for assets valued based on bond yields (such as property) to perform well.

Cryptocurrencies experienced a resurgence, with Bitcoin surpassing US$100,000 for the first time amid optimism that the Trump administration might deregulate the asset class and promote it as an alternative investment for US citizens.

Finally, the NZD had a tough year, making overseas holidays increasingly expensive.

Our funds generally had a strong 2024, with our Australasian products and Global large cap fund, in particular, posting healthy returns for our investors - well above the long-term average.

Looking ahead, I asked ChatGPT to come up with an outlook for 2025. So, this is currently where the “AI Consensus” sits for the year ahead.

AI Summary

2025 Outlook: Positioning for Change 🌟

📊Equities: Expect U.S. markets to moderate as valuations face scrutiny. Opportunities lie in small caps and international markets, especially Asia’s tech and infrastructure sectors.
📉Bonds: Fixed income remains attractive, especially investment-grade and municipal bonds, as rates stabilize.
🏗️Real Assets: Infrastructure and real estate should thrive, driven by government spending and housing demand.
🌾Commodities: Green metals (lithium, cobalt) will shine as the energy transition accelerates.

2025 is shaping up as a year for recalibration - strategic, diversified portfolios will be key.

Pie Funds’ Summary
My view is that the market will remain jittery due to ongoing political announcements from the White House, especially in the first quarter of the year. However, with Musk, Trump, and others wanting a buoyant stock market to symbolise America’s greatness, we can expect generally positive market news.

Equities: There is potential for a mania in stock prices as falling interest rates, the AI boom, and strong US growth provide the ingredients to fuel animal spirits. Hopefully, some of this will rub off on the rest of the world, broadening the rally.

Bonds: Interest rates in the US are likely to remain around current levels but will fall in the rest of the world, with the exception of Japan. Another steady year for bonds is expected.

Real Assets: Similar view to the AI summary, there are strong tailwinds in place for the sector.

Commodities: With the potential for peace in the Middle East and Ukraine, commodities generally should be softer.

Finally, I think Chinese equities could be a contrarian top performer.