Top 10 News Stories of the Year

In 2024, the global economy took centre stage as leaders addressed inflation, considered shifts in monetary policy, and the impact of Artificial Intelligence (AI). Here are 10 major news stories of the year:

2024 was the year of elections – 2024 was an election Supercycle with 83 national elections across 78 countries. This level of global electoral activity won't be seen again until 2048 (source: 2024 Year of Elections by WTW). These elections are expected to create some regulatory and policy uncertainty in the near/medium term.

Trump re-elected – At the age of 78, Trump headed for a sweeping Electoral College victory over Vice President Kamala Harris.

Price of Gold – Gold reached an all-time high of $2,789 per troy ounce on October 30, 2024 (source: FactSet). Demand was driven by emerging markets buying gold to support their currencies and reduce reliance on the US dollar, along with ongoing geopolitical risk.

An Economic Soft Landing – In 2024, the "soft landing" concept was widely discussed, with growing optimism about global economic prospects. An economic soft landing is when the economy slows enough to reduce inflation without triggering a recession. Central banks aim for this by raising interest rates without causing major job losses or economic shrinkage. The May Chief Economists Outlook noted "cautious optimism," a sentiment that persisted throughout the year.

Public Debt Levels – In 2024, rising interest rates heightened concerns about public debt. The September Chief Economists Outlook identified debt as a threat to economic stability. Global public debt will exceed $100tn by the end of 2024 unless major economies step up to stabilise borrowing, according to the International Monetary Fund (IMF).

AI product explosion – The rapid growth of generative AI continued unabated in 2024, with a steady stream of new products and frequent updates to existing platforms like ChatGPT, Microsoft Copilot, and Apple Intelligence.

Oil Prices – Despite OPEC's production cuts, the Ukraine war and Middle East conflict, oil prices are now lower than at the start of the year. Factors include increased supply from the US and Brazil and minimal disruption from the Middle East.

Bitcoin value - Bitcoin's price surged past $100,000 for the first time on December 4th. The spike was driven by Trump's announcement to nominate Paul Atkins as the new SEC chair, fulfilling a key campaign promise to the crypto industry.

Bank of Japan raises interest rates – In March 2024, after 17 years of ultra-low rates, the Bank of Japan (BOJ) raised its key interest rate from -0.1% to 0%-0.1%. The BOJ also ended its yield curve control policy, which had been criticised for distorting markets by keeping long-term interest rates low.

Biggest Single Day Stock Swings – Nvidia's market capitalisation, currently at $3.4tn as of 12^th Dec, (source FactSet) can fluctuate by billions in a day. On 31 July 2024, it rose by $324bn in one day (source FactSet). See the chart below on Nvidia’s total market value since 2018, on its path to a $4tn market capitalisation.

The Noise

• The UK’s annual inflation rate rose to 2.6% in November 2024, matching market consensus and marking its highest level in eight months. Notably, the labour market remains a key driver of these inflationary pressures, as wage growth continues to outpace historical averages, reinforcing upward momentum on consumer prices. Supporting this, average earnings (including bonuses) grew by 5.2% year-on-year in November according to recent data from the Office for National Statistics (ONS). In light of these dynamics, the Bank of England opted to keep interest rates unchanged, signalling a cautious approach to monetary policy while balancing inflation management with economic stability. This decision was in line with market expectations, underscoring the Central Bank's commitment to steady guidance amidst ongoing economic challenges. Markets reacted with gilt yields falling following the decision, while the pound depreciated against the dollar.

• The US Federal Reserve announced a quarter point interest rate cut to 4.5% this week. This was the third consecutive cut this year, yet they reined in the number of cuts they expect in 2025 to just two. Chair, Jay Powell, said future easing would require fresh progress on inflation. This reflects an effort to keep what appears to be a steady but cooling economy stable while maintaining flexibility for future monetary adjustments. This comes in after inflation rose to 2.7% in November, indicating persistent price pressures that may limit the scope for aggressive rate cuts moving forward. The Fed’s outlook for 2025 being reduced jolted US equity markets, with Wednesday seeing one major American market experiencing its worst day of losses since August and another down 2.95%.

• Tensions between Trump and the Eurozone rise as the president-elect warns the bloc that member states will face tariffs unless they make significant oil and gas purchases from the US. America already supplies around 15% of the EU’s oil imports, according to Eurostat. This threat follows his focus on imposing higher tariffs on the Eurozone (along with Canada, Mexico, and China) which would negatively impact European economies. The EU has suggested increasing liquified natural gas imports from the US, a move that could help reduce energy costs while addressing Trump’s demands. The EU is desperate to avoid a trade war with Trump and has spent the past month looking for ways to avoid tariffs. However, analysts point out that the US lacks the spare LNG production capacity to significantly boost exports to Europe in the short term. Their economic reliance on the US means the EU is exploring possible trade reprisals if talks falter.

The Numbers

The Nuance

Over half of people in England and Wales (54%) don’t celebrate Christmas in a traditional sense, yet nearly nine in ten Britons (86%) still take part in the holiday festivities, according to a recent YouGov survey. So, what drives the massive spending surge every year, even when many aren’t observing its traditional roots? Introducing: the economics of Christmas shopping.

It would be scrooge-like to suggest that Christmas spending isn’t good for the economy. A study by PwC highlighted the sectors poised for the largest spending increases. These are premium food, clothing, and technology. Together they are projected to push UK Christmas spending to £22.7 billion. Notably, PwC identified Christmas dinner as the top spending priority for 2024. Further, from work Christmas parties to gatherings with family and friends, this period is a key driver for hospitality with pubs alone are expected to contribute £3.3 billion to the economy this festive season.

Consumers could feel the pinch when purchasing presents as the average spend on gifts and celebrations is expected to rise by 5% to £433 per consumer this year, according to PwC. However, on a larger scale, the cost of Christmas has risen by almost 25% over the past three years. In the current UK economic climate, this could offer some respite as recent data from the ONS reveals that the economy has flatlined. GDP is down by 0.1% and inflation up by 2.6%. Following the UK budget announcement at the end of October, consumers have remained cautious, making the festive period an opportunity to inject much-needed spending enthusiasm into the economy.

Many people will be frantically shopping for Christmas presents and racing through supermarkets to stock up for Christmas dinner this week. But is it really ‘the most wonderful time of the year’? Even if it feels stressful for some, economists are clear on one point: the spending benefits to the economy are undeniable.

The Niche
A fun financial markets fact of the week

Many people might’ve asked for money on their Christmas list, but how many people know the history behind it? At its core, money is a standardised medium for exchanging goods and in theory could take any form. One of the first major currencies was commodity based, called ‘The Shekel’, which was a specific weight of barley used some 5,000 years ago by the Mesopotamians. We first saw silver and gold coins used for trade in Lydia, in territories we would now call Turkey, around c.650-490 BC. Yet the oldest currency still in use was minted in England during the Anglo-Saxon period and dates back to around 775 AD – Yes, the pounds in your wallet are part of the longest surviving currency.