Average growth in the United States stood at 2.7% (no official data from the last quarter), just below the 2.9% for 2023.
2024 is the fifth year of the post-Covid pandemic cycle. According to forecasts hoped for at the start of the year, it was supposed to be the first year without turbulence from a macroeconomic point of view, after the sharp fluctuations in growth and inflation over the previous four years. The objective has been achieved.
Average growth in the United States stood at 2.7% (absence of official data from the last quarter), just below the 2.9% for 2023. Growth which systematically exceeded expectations while the estimates of the consensus were less than 1% at the start of the year.
In less good shape, growth in the euro zone, at 0.8% on average over the year, is however improving compared to 0.4% in 2023.
Inflation is falling, to 2.9% for the United States on average over the year, after 4.1% in 2023 and 8% in 2022. Average inflation in the euro zone was 2.4% , increasing from 5.5% in 2023 to 8.4% in 2022.
The weakness of the euro zone, compared to the strength of the United States, is explained by the weakening of domestic demand, but, as the euro zone remains an export zone, it is also linked to the persistent weakness of growth in China and world trade.
China’s growth stood at 4.8% this year, missing, albeit narrowly, the 5% target, and slowing from the 5.2% rate in 2023, which had already disappointed expectations of a reacceleration after the Covid pandemic.
The other aspect of Chinese moderation is the low level of inflation, i.e. 0.4% in 2024, which has changed little compared to the level of 0.2% in 2023.
World trade, after the strong fluctuations of the Covid and post-Covid periods, returned to a positive but resolutely moderate trend, confirming that global economic activity is evolving at a limited pace compared to the previous cycle, with the sole exception of States. -United.
Stabilization of inflation has allowed central banks to start removing the restrictive measures they had adopted in 2022/23.
The Fed cut rates three times, a total of 100 basis points (from 5.5% to 4.5%); the ECB made the same reduction in four times (-100 basis points, from 4.0% to 3.0%).
Monetary policy decisions mainly had an impact on the shortest maturities of the bond market, which recorded falling rates over the year.
On the other hand, the long-term rates of the central countries (the United States and Germany), which already started from a lower level than the short-term rates and which were supported by stable economic growth, remained practically stable.
For the same reason, namely confidence in the continuation of the global cycle, the rates of long-term bonds of peripheral countries of the euro zone, including Italy, fell, thanks to a significant reduction in spreads compared to Germany. In 2024 for Italy, the gap increased from 165 to 110 basis points.
Significantly positive absolute returns for spread markets thanks to the low change in underlying sovereign interest rates and the sharp reduction in spreads.
The yield rates on the credit components (Investment Grade and High Yield) declined steadily throughout the year. Those in emerging markets fell less, but again the absolute return was largely positive.
At this stage, credit spreads are at the lowest levels of previous cycles, in the 90 basis point region for the Investment Grade EUR segment and in the 300 basis point region for the High Yield EUR segment. Now, the possibility of a further decline in spreads is modest, but Investment Grade and High Yield securities remain attractive in the context of a continuing economic cycle.
Emerging market spreads remained above the lowest levels of previous cycles (zone of 330 basis points, compared to lows of 250 basis points in the past), given a more fragile macroeconomic environment for emerging economies and an unfavorable external environment, with a strong dollar and still high American rates.
Clearly positive trend for stock markets, driven by American indices.
The American stock market has progressed in an almost linear manner, with a single episode of real volatility at the beginning of August, recording an appreciation of around 30%. Consider that in 2024, US corporate profits increased by approximately 10%. The rest of the rise in the US stock market was driven by rising multiples, supported by expectations about the length of the business cycle and earnings.
The balance of European indices was also positive, but the extent of the increase represented around a third of that recorded across the Atlantic. The Eurostoxx index, in particular, reached the highest of the year in May and then moved in a sideways corridor, following the lack of macroeconomic acceleration.
The results are better for emerging markets, which however stopped progressing in October, pending an evaluation of the decisions of the new American administration in terms of tariff policy.
On a sectoral level, we know that the growth of stock markets remains driven by technology. It is worth noting, however, that in 2024 the gap between technology and other sectors, such as financial services and consumer discretionary, was modest and much smaller than in 2023, which is a sign of an expansion of the market.
The dollar strengthens against the euro in the 2024 scenario, but remains in the range of 1.05 to 1.13 where it has been since 2023.
The victory of Donald Trump and the Republicans pushed the dollar towards the highest of the range, at 1.05 against the euro, pending new measures to revive the American economy and a policy tariff which could penalize the euro zone and other trading partners.
While waiting for the American administration’s plans to materialize, the dollar could strengthen further.
On the other hand, a dollar that is too strong would be a drag on the American economy, which suggests a more moderate positioning for the Trump administration.
