2024 – Year in review

To understand 2024, a brief recap is required regarding the post-pandemic movements in inflation that have been the main driver of financial markets in the last four years. After a surge in prices that began in late 2020 and resulted in inflation peaking at almost 10% in Europe and the United States in 2022, inflation fell back close to 2% by the end of 2023 because of sharp increases in official central-bank interest rates in 2022 and 2023. As 2024 began, central banks had regained control over inflation and, most importantly, there were hopes that they would start to reduce interest rates again.

The main central banks did indeed cut their key interest rates incrementally throughout 2024, particularly in the United States, the eurozone and Switzerland. Those rate cuts helped drive equity prices to new peaks, especially in the technology sector, which was also supported by investors’ hopes regarding artificial intelligence. Economic growth, which had slowed sharply due to high official interest rates in 2023, stabilised last year. However, it remained close to zero in Europe, which continues to face numerous challenges, particularly in its manufacturing sector.

Broadly speaking, real estate also benefited from positive trends in 2024. Prices of Swiss real estate, which makes up more than 16% of the Fund’s portfolio, remain supported by housing shortages and immigration. The only investments posting negative returns in the Fund’s portfolio last year were bonds – with the notable exceptions of those denominated in Swiss francs – because of concern about government debt levels and a potential rebound in inflation. In 2024, those concerns pushed long-term bond yields higher all around the world, except in Switzerland where they fell.

However, 2024 also brought major political upheavals on both sides of the Atlantic. In Europe, government instability and the growing influence of the far right was cause for concern in France, Germany and Austria. In the United States, the future is uncertain because new customs tariffs could drive up inflation and damage the economy, not just in the United States but worldwide. In geopolitical terms, hopes of a swift end to the armed conflicts in Ukraine and Gaza are being counterbalanced by worries caused by the United States’ withdrawal from several international organisations and particularly from its role in guaranteeing the security of Western countries. Caution is required when dealing with this new context and above all when gauging its impact on the economy and the financial markets.