Monthly Market Review - December 2024
December marked the end of a year defined by strong performance across major asset classes, with equities, bonds, and gold all recording positive returns. Despite a pullback in the final month, markets benefited throughout the year from easing monetary policies and robust corporate earnings. The MSCI World Islamic Index posted a loss of 3.4% this month but achieved gain of 5.8% for the year 2024. Similarly, the Dow Jones Sukuk Index recorded a modest loss of 0.6% this month while delivering a full year return of 3.4%.
In the US, equity markets ended the month lower after reaching record highs earlier in the year, supported by an AI-driven rally and corporate strength. The Federal Reserve continued its rate cut cycle, lowering the target rate by 25 basis points to address inflation and stabilize the job market. Over the year, three rate cuts totaling a 100-basis-point reduction reflected efforts to balance inflation control and labor market stability. Inflation for November showed a slight uptick at 2.7% as measured by CPI, and initial jobless claims came in at 219,000 reflecting resilience in the economy. Incoming Republican-led government’s anticipated fiscal policies are leading to higher Inflation expectations with the 10-year Treasury yield rising by 40 basis points in December. Despite the rate cuts, the dollar remained strong this year vs major currencies, with the dollar index rising 7.1% despite rate cuts in the US.
In the UK, domestic economic activity showed signs of strain, as the Purchasing Managers' Index (PMI), a key indicator of economic health fell to 47.3. Rising wages contributed to an increase in the Consumer Price Index (CPI) to 2.6%, which remains a focal point for policymakers. While higher wages and inflation pose challenges, the steady labor market and fiscal measures provide a foundation for potential stabilization in the medium term.
The Eurozone faced similar challenges, with manufacturing activity contracting for much of the year. The PMI stood at 45.2 in December, reflecting ongoing pressure in the industrial sector. The European Central Bank responded by cutting its policy rate by 25 basis points during the month, signaling support for economic recovery. Inflation remained subdued, and growth within the services sector provided a modest counterbalance to industrial weaknesses.
In China, markets remained stable despite subdued domestic consumption and lingering challenges in the property sector. Proactive measures by the People’s Bank of China, including a 50 bps reduction in the reserve requirement ratio and targeted fiscal stimulus, have provided some support to the economy. However, weak consumer confidence and uncertainties tied to potential US tariffs continue to weigh on recovery prospects.
Looking ahead, global markets are expected to remain sensitive to central bank policies and geopolitical developments. Risks tied to inflation, trade policies, and industrial slowdowns will require careful navigation. Investors are encouraged to maintain a diversified portfolio to manage potential volatility and capitalize on emerging opportunities in 2025.1
References:
1 Data sourced from Bloomberg – Economic Indicators
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As with any investment, a Wahed Invest Ltd investment puts your money at risk, as the value of your investment can go down as well as up. The tax treatment of your investment will depend on your individual circumstances and may change in the future. If you are unsure about whether investing is right for you, please seek expert financial advice.
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