FNArena’s Weekly Insights – December 02 2024
A Cautious Preview Into 2025
By Rudi Filapek-Vandyck, Editor
Traditionally, the final weeks of each calendar year trigger educated predictions about what the year ahead might have in store for investors and financial assets, and this year is no exception.
What is different, however, is most predictions this time around are overwhelmingly dominated by restraint and caution, mostly because of historically high valuations for American equities.
No surprise thus, the most preferred scenario is for the current bull market driven by AI and large cap growth stocks to broaden out towards lagging cyclicals and smaller cap companies, with Europe and emerging markets ready to narrow the gap with the Almighty USA.
Not everyone is on par with that scenario. Certainly not everyone thinks US markets cannot continue to lead the rest of the world for another year, or longer.
President Trump’s America First policy approach draws a long shadow over next year’s prospects for non-US markets, with further China stimulus likely on hold until more clarity is gained on US import tariffs.
In Australia, the absence of RBA rate cuts and very little on offer in terms of earnings growth (current consensus 0.9% EPS growth) probably means direction and momentum for the ASX will be even more dependent on what happens in both major global policy centres.
While many a forecaster feels uncomfortable with current valuations for US equities, the lack of earnings growth in Australia doesn’t make the local market any cheaper, with similar observations being made about the local banks.
So what should investors expect? Is the future upside from central bank rate reductions and from AI-driven productivity already reflected in this year’s share market rally? Will Donald Trump’s additional stimulus reverse the bond market and crash today’s multiples? Are import tariffs the poison that ends global momentum?
Simple is not always correct
A lot of this year’s anxiety revolves around share market valuations. Last week, Robin Griffiths, Editor of US-based investment newsletter The Adaptive Asset Allocation Report announced he’d pulled out all his personal money from US equities to go all-in for gold instead.
“My nerves cannot handle it.”
