What shot the lights out in 2024 (and a look ahead)

A very Happy New Year to you all. I started mine with a trip to Brentford stadium to watch the Arsenal game, and had a cheeky beer at half-time sealing the fate of any talk of a dry January. Oops.

What shot the lights out in 2024?

Before we look ahead (and let’s hope that I’m better with financial resolutions than with alcohol ones), it’s always interesting to look back at the previous year and see what shot the lights out. Any guesses?

The main story of the year was the S&P 500, which returned over 20% for the second consecutive year. But under that bonnet, the 3 best-performing stocks were Palantir (a data firm up +340%), Vistra (a power company up 258%) and Nvidia (you know, up 171%).

As for sectors, the S&P 500’s communication services sector led the pack and was up around 40%, closely followed by information technology and then consumer discretionary (including brands such as Tesla, McDonalds and Starbucks). We’re all talking, watching telly, fossicking about online and eating.

Specialised thematic Exchange-Traded Funds (ways to access more focussed bundles of shares via one product) were one way to get better returns than the average and Amundi’s Semiconductors ESG Screened fund returned 62%, followed by VanEck’s Crypto and Bitcoin Innovators fund. You can read more about 2024’s best performing funds, although beware the lure of a rearview mirror.

Chocolate and a tango in Argentina

Away from technology, commodities had a good year. I never would have guessed that the WisdomTree Cocoa ETC (Exchange-Traded Commodity) would return over 280%. This is not down to people like myself chomping away on Fruit’n’Nut, but weather patterns and disease impacting harvests in West Africa, pushing the price sky high as availability plummets to historical lows. Coffee was also a standout performer.

As for regions, it was Argentina which shot the lights out, rising by over 170% in 2024. This was followed by the tech-heavy Nasdaq index in the States, then Turkey, Hungary and Taiwan.

In Buenos Aires, President Milei took over in December 2023 and tamed hyperinflation with a hardcore budget and built up currency reserves. And in Turkey, Erdogan shoved up interest rate to 50% to fight inflation. Neither economy is close to stable prosperity, but markets can move in response to a situation going from awful to a bit less bad. Everything is relative!

What about Blighty?

Closer to home, the FTSE 100 was outperformed by markets in Chile, China, the Czech Republic, the Netherlands, Norway and Spain BUT was up by about 6% for the year, so it was a solid, if not remarkable, performance. IAG (British Airways owner), Rolls Royce and NatWest were the winners of 2024.

And now to 2025

So if any of you had invested in Argentina, cocoa and Rolls Royce, you're a spooky genius and/or a wizard. If, like me, you didn't, where might we turn our attentions in 2025?

The story this year will be dominated by inflation, interest rates, the earnings of a handful of tech companies, geopolitics and Donald Trump.

As we can see from 2024, fortune favoured the brave who made some thematic bets and sectoral bets. Even if you didn’t, those who held the popular Fidelity Index World (or any other global tracker fund) will have made over 20% from this simple passive approach. The question for 2025, in my opinion, is whether we stick with the extremely tech-heavy indices, such as the S&P 500, or whether we make some more active decisions?

For those who want to dial down the tech exposure just a touch and broaden their US exposure to more of the domestic economy, you could consider an ‘equal-weighted’ S&P 500 index fund. This effectively gives you equal exposure to all 500 companies, rather than giving you a bigger exposure to the bigger companies based on how much they're worth. For example, an equal weighted fund will have about a 0.27% exposure to Tesla, whereas a traditional S&P 500 fund will have nearer 2%.

This approach will give you higher exposure to things like healthcare, financials, industrial and utilities. It won’t be for everyone, but I certainly think investors need to consider concentration risk quite carefully this year.

Other ways to make money

After last year’s Budget, it’s more important than ever to plan our tax and make use of our ISAs and pensions. Yes, stock market returns are important, but we can arguably make as much money in 2025 by wising up on spending (top tip, go to Settings on your phone and check your subscriptions – always worth doing), by NOT leaving cash in limp current accounts, and by understanding our tax thresholds and the power of the mighty pension to minimise the tax we pay.

Next week, I’ll bring you my 10 top tips for saving money in 2025. Have a great weekend everyone. I'm still braving the sea and have my goggles packed for later, although I'm mildly disconcerted to see that it is minus 2 outside! Gulp.

Holly

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