INTRODUCTION

Well, what an inaugural year for 42 Wealth Management!

Firstly, we would like to thank you for your patronage and for allowing us to be the stewards of your wealth, in what has been a year of seemingly unrelenting geopolitical and economic vacillations. It is a privilege to look after such lovely clients, and to be able to support you throughout periods of profound volatility and change.

We wanted to provide a review of some of the most notable events in 2024 and some prognostications of how we see 2025 panning out (brave, we know).

2024: A REVIEW – Never a dull moment…

UNITED KINGDOM

The UK economy continued to face persistent challenges in 2024, namely inflationary pressures and stagnant economic growth. While inflation showed signs of moderating from its peak in 2022-2023, high energy prices and supply chain disruptions continued to strain households and businesses. The Bank of England maintained tight monetary policy to control inflation, keeping interest rates at relatively high levels (UK base rate will finish the year at 4.75%), which subdued both consumer spending and investment. Anecdotally, high street Boxing Day sales are likely to be the weakest in many years – M&S and Next did not even open their stores marking a new nadir for non-online retail.

In politics, the change of government in July appeared to do little to assuage the British electorate that things would improve economically in the short-term. The incoming Labour government claimed the ‘black hole’ left by the outgoing Conversative administration was significantly larger than anticipated and the resulting changes to fiscal policy have been significant.

Discussions regarding Scottish independence have been reinvigorated although these are likely to be fiercely fought off by the Labour government.

UNITED STATES

The US economy continues to be the bastion of the global economy. Its versatility and ability to adapt to secular trends saw it outperform all other major economies despite sharing many of the same global headwinds. The labour market remained robust, and inflationary pressures eased significantly allowing the Federal Reserve to begin reducing rates (the US Fed rate will finish the year at 4.5%).

The incoming Trump administration has led many to wonder whether the future holds continuing economic resilience or a period of reinflation (due to imposing tariffs on its trading partners). The latter could be disastrous for the already-heavily indebted Treasury. However, during November the S&P500 rose by 5.9% following the Trump election victory. Again, potentially conflicting ‘fear’ and ‘cheer’ signals indicate a market which is unsure of how 2025 will play out.

The US dollar retained its status as a global reserve currency. However, geopolitical tensions with China in particular – sparked concerns about supply chain disruptions and the need for re-onshoring critical industries. A key area of focus was the Inflation Reduction Act, which incentivises investments in renewable energy and advanced manufacturing, positioning the US as a leader in green technology. Any trade war with China is likely to throw up concerns regarding the level of US debt held by China (c. $800bn).

ASIA

India continued to exhibit its growing dominance of the Asian economy. Growing domestic demand, government-led infrastructure projects, and investments in technology sectors drove India’s performance strong economic and stock market performance. Improved governance has made India’s stock market more appealing to foreign investors.

China’s sabre-rattling in the South China Sea proves to be an ongoing threat to regional stability. This, along with its property market oversupply (and heavy indebtedness) and high youth unemployment continue to provide headwinds for the nation’s economy and stock market despite some sizable fiscal intervention late in the year. China continues to prioritise domestic innovation and energy security while deepening partnerships with nations in Africa and Latin America to counter Western hegemony through its Belt & Road initiative.

Japan’s flagship stock market, the Nikkei, looks set to have its strongest year since 1989 adding 21% over the course of 2024. This would mark a finish at a 35-year high since the economy’s property bubble at the end of the 1980s. This has attracted a significant degree of interest from retail investors who believe the market now looks like a viable investment.

2025: A similarly exciting year in prospect…

2025 looks unlikely to be upstaged by its predecessor. War in the Middle East and Europe, as well as ongoing conflicts and humanitarian crises in Africa, continue to destabilise the world’s geopolitics. Additionally, irrespective of your political persuasion, it is difficult to presume the inauguration of Donald Trump for the second time on 20th January will settle things down immediately, if at all. There will likely be a clearer understanding of how Trump’s administration will lay out its policies and we will finally see whether Project 2025 is a conspiracy theory or whether it is based in fact.

However, as at the start of 2024, it is all too easy to be weighed down by negative news. There is much to be excited and enthused about: the symbiosis of technological and biotechnological advancements, quantum computing, further AI advancement, continuing growth in emerging and frontier markets and growing middle classes in developing economies to name a few. We must remain positive about humankind’s desire for innovation and development and the benefits these can bring to the many, not just the few.

We will remain diversified and continue to retain a degree of downside protection in your portfolios to allow us to produce solid risk-adjusted returns and mitigate any deterioration in conditions – we are not naïve or complacent about the risks but will actively balance this against optimising returns for you.

We at 42WM would like to wish you your families and loved ones a happy, healthy and prosperous 2025 .

Best wishes,