Despite political upheavals, stock markets and bitcoin smashed records last year, fuelled by investor enthusiasm for artificial intelligence (AI), falling interest rates and hopes of tax cuts.
Here are four of the most remarkable aspects of year for financial markets:
STOCK RECORDS FALL LIKE DOMINOES
Photo: AFP
Wall Street’s three main stock indices blew past record highs to set new peaks last year, with the Dow Jones Industrial Average climbing above 45,000 points, the S&P 500 above 6,000 and the NASDAQ Composite above 20,000.
“It was an exceptional year, driven by the performance of tech shares thanks to artificial intelligence,” Pictet Asset Management Ltd senior investment adviser Christopher Dembik said.
The Dow ended the year up by about 13 percent, while the S&P 500 and the NASDAQ, which have more tech stocks, notched annual gains of more than 23 percent and about 29 percent respectively.
Shares in Nvidia Corp, which makes processors particularly adept at running AI models, including applications such as ChatGPT, rose more than 170 percent last year.
“It’s now been about two years that ChatGPT was launched and it’s been two years that the AI buzz pushed some US Big Tech companies to the sky,” Swissquote Bank Ltd senior analyst Ipek Ozkardeskaya said.
“Nvidia, which has become the icon of the AI rally, gained almost 1,000 percent since then, the Magnificent Seven nearly 100 percent since last November,” she added.
In Europe, records also fell, but the gains were less marked. Frankfurt’s DAX, driven by business software developer SAP AG (up 70 percent) broke the 20,000-point level and finished the year with a gain of 18.9 percent.
Tokyo’s Nikkei 225 index gained almost 20 percent last year, finally surpassing the high seen before Japan’s asset bubble burst in the 1990s.
A VERY POLITICAL YEAR
US president-elect Donald Trump’s victory in November’s election gave Wall Street even more of a boost on hopes he would follow through on pledges of deregulation and tax cuts.
“The market considered that will mean more growth and for longer,” Myria Asset Management SAS director Pierre Bismuth said.
However, political developments did not always help investors. Look at France: President Emmanuel Macron’s calling of early parliamentary elections backfired with no clear winner, and the Paris CAC 40, which had been up more than 6 percent ahead of the election, ended last year down more than 2 percent.
Weakness in China further dragged down luxury stocks.
This year, investors are keeping a wary eye to see if Trump implements threatened tariff hikes, as well as the outcome of early elections in Germany next month.
BITCOIN, GOLD AND COMMODITIES
Bitcoin rode expectations of deregulation under Trump to break US$100,000, rising more than 120 percent. Ethereum grew by more than 40 percent, even if it did not set a new all-time record.
Gold also set a new record, as it benefitted from its safe-haven appeal during times of geopolitical tensions.
Commodities such as coffee and cocoa set new records as poor weather caused supply concerns, with prices of the premium arabica coffee gaining about 67 percent in New York last year to break past the highest levels in more than 40 years, while cocoa gained 172 percent.
However, soybeans took the spot as the worst-performing major commodity last year. Ample production in the US and Brazil, combined with a slowdown in Chinese demand, drove prices down about 24 percent for the year — the biggest annual drop in two decades.
MONETARY POLICY ROLLER COASTER
The central banks of the US and some EU countries finally began to cut interest rates they had hiked to tame an inflation spike triggered by the post-COVID-19 pandemic recovery and the Russian invasion of Ukraine.
Switzerland got the ball rolling in March, followed by the European Central Bank in June and the Bank of England and the US Federal Reserve in September.
Investors as well as central banks were anxious about the pace of interest rate cuts: Not too fast to reignite inflation, but not so slow that activity falls.
Trading sometimes turned volatile as investors interpreted economic data through the prism of its impact on the Fed’s likelihood to cut rates.
The US central bank has been paring back expectations of further rate cuts, especially as Trump’s tariffs could spark fresh inflationary pressures, while the ECB is expected to continue cutting rates, given stagnant growth in the eurozone.
CHIP WAR: Tariffs on Taiwanese chips would prompt companies to move their factories, but not necessarily to the US, unleashing a ‘global cross-sector tariff war’ US President Donald Trump would “shoot himself in the foot” if he follows through on his recent pledge to impose higher tariffs on Taiwanese and other foreign semiconductors entering the US, analysts said. Trump’s plans to raise tariffs on chips manufactured in Taiwan to as high as 100 percent would backfire, macroeconomist Henry Wu (吳嘉隆) said. He would “shoot himself in the foot,” Wu said on Saturday, as such economic measures would lead Taiwanese chip suppliers to pass on additional costs to their US clients and consumers, and ultimately cause another wave of inflation. Trump has claimed that Taiwan took up to
A start-up in Mexico is trying to help get a handle on one coastal city’s plastic waste problem by converting it into gasoline, diesel and other fuels. With less than 10 percent of the world’s plastics being recycled, Petgas’ idea is that rather than letting discarded plastic become waste, it can become productive again as fuel. Petgas developed a machine in the port city of Boca del Rio that uses pyrolysis, a thermodynamic process that heats plastics in the absence of oxygen, breaking it down to produce gasoline, diesel, kerosene, paraffin and coke. Petgas chief technology officer Carlos Parraguirre Diaz said that in
Japan intends to closely monitor the impact on its currency of US President Donald Trump’s new tariffs and is worried about the international fallout from the trade imposts, Japanese Minister of Finance Katsunobu Kato said. “We need to carefully see how the exchange rate and other factors will be affected and what form US monetary policy will take in the future,” Kato said yesterday in an interview with Fuji Television. Japan is very concerned about how the tariffs might impact the global economy, he added. Kato spoke as nations and firms brace for potential repercussions after Trump unleashed the first salvo of
SUPPORT: The government said it would help firms deal with supply disruptions, after Trump signed orders imposing tariffs of 25 percent on imports from Canada and Mexico The government pledged to help companies with operations in Mexico, such as iPhone assembler Hon Hai Precision Industry Co (鴻海精密), also known as Foxconn Technology Group (富士康科技集團), shift production lines and investment if needed to deal with higher US tariffs. The Ministry of Economic Affairs yesterday announced measures to help local firms cope with the US tariff increases on Canada, Mexico, China and other potential areas. The ministry said that it would establish an investment and trade service center in the US to help Taiwanese firms assess the investment environment in different US states, plan supply chain relocation strategies and
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