All Eyes on 2025: How December Set the Stage for the Year Ahead

US Federal Reserve Moves Shake Markets In December, the US Federal Reserve cut interest rates by 0.25% but warned there might be fewer cuts in 2025 than people had hoped. This made investors nervous about how new government policies might affect inflation and borrowing costs. The news pushed up US bond yields (the returns investors get on US government loans) and made the dollar stronger. This wasn’t great news for countries with weaker economies (called emerging markets), as it made their loans in US dollars more expensive to pay back and reduced their ability to buy things internationally.

Emerging Markets vs. Developed Markets Emerging Market stocks outperformed Developed Market stocks, showing resilience despite the pressure from the strong dollar. South African investments, while lagging behind other emerging markets, still delivered good results over the year.

• South African Equities: The Johannesburg Stock Exchange (JSE) All Share Index dropped slightly by 0.3% in December. Winners :- Industrial stocks grew by 2.7%, and small-cap companies performed well, rising 3.3%.Strugglers: Resource stocks fell by 5.4%, and large-cap companies dipped 0.7%.Real Estate: Listed property sectors managed small gains, with REITs up 0.5%.

Bond Market Highlights South African Nominal Bonds posted a rare negative return (-0.3%) for December, only the fourth time this has happened in 24 years. Inflation-linked bonds managed a modest 0.8% gain. Over the year, the All Bond Index (ALBI) finished with a 17.2% return—its best performance since 2003!

Commodities Take a Hit Commodity prices generally declined in December:

• Gold: Down 1.0%
• Platinum: Down 5.8%
• Oil: The exception, with Brent Crude rising 2.3%

Currency Challenges The South African Rand lost value against major currencies:

• Down 4.5% against the US Dollar
• Down 2.4% against the Euro
• Down 2.9% against the British Pound

The Big Picture Despite some bumps in December, many markets delivered strong year-long results. However, rising US interest rates and a strong dollar remain challenges for emerging markets like South Africa. These trends will be important to watch as 2025 begins, especially for anyone involved in global investing or trading.