It’s the final trading day of the year, when investors will be adding up their profits (or losses) and turning their attention to 2025.
2024 has been another year of gains in the markets, with record highs seen on both sides of the Atlantic. Wall Street has led the charge, helped by the boom in tech stocks which continued over the last 12 months.
Investors in the UK stock market have enjoyed gains too – the blue-chip FTSE 100 index is on track to record a 5% rise this year, broadly in line with the European average. That would be its best year since 2021, when it rose 14.3%, and follows a 0.9% rise in 2022 and a 3.8% gain in 2023.
The ‘Footsie’ is ending the year on the back foot, though, down 2% in December. On Monday it closed at 8,121 points, a fair way shy of the record high of 8,474 set in May when falling inflation and hopes of interest rate cuts were lifting stocks.
The smaller FTSE 250 index, seen as a better barometer of the UK economy, has gained about 3.6%. That doesn’t include the income from dividends, though, which shareholders received over the year.
As AJ Bell investment director Russ Mould puts it: “Total returns from the UK stock market in 2024 handily beat cash, bonds and inflation, but the poor comparisons with the USA remain the stick with which the FTSE 100 is constantly beaten.
"Whether the Nasdaq and S&P 500 will finally run out of puff in 2025 remains a matter of debate, but value- and income-seeking contrarians could be forgiven for giving the UK a closer look, given consensus forecasts for earnings and dividend growth."
Across the channel, France’s CAC 40 has lost about 3% during a year punctuated with political drama in Paris. But Germany’s Dax, which closed for the year yesterday, has gained almost 19% – driven by software company SAP, which rose 60% in the year.
Tech stocks also drove Wall Street higher, lifting the Nasdaq by almost 30% so far this year, and the S&P 500 index by over 23%.
Tom Stevenson, investment director for personal investing at Fidelity International, explains: “After the turbulence of 2023, we’ve seen a marked shift towards growth, driven by stabilising inflation and a more positive outlook for interest rates.”
But in December alone, equity markets have been on the back foot – seemingly worried by ructions in the bond market where yields (interest rates) have been rising amid fears of sticky inflation in 2025.
This year has not brought much of a Santa Rally, and we may not get one today either – with the futures market indicating shares may dip in London, where the market will close early at lunchtime, giving traders time to spruce up for New Year festivities.
The US dollar is on track to record strong gains in 2024 against most currencies. The dollar index, which measures the greenback against a basket of rival currencies, is up 6.5% over the last year, lifted by expectations that the US Federal Reserve will be slower to cut interest rates than rival central banks in 2025, if the incoming Trump administration’s policies – such as new tariffs on imports – are inflationary.
Trump’s election victory is expected to lead to US fiscal expansion characterised by increased spending and tax cuts.
Tony Sycamore, market analyst at IG, explains: "This, in turn, is likely to result in stronger US growth, higher inflation, and, subsequently, higher interest rates, all of which contribute to a stronger US dollar. Furthermore, Trump’s election victory is anticipated to result in tariffs on imports from countries, including China. Mexico, Canada and the EU which will dampen growth expectations outside the US and weigh on commodity prices."
The agenda
• 12.30pm GMT: London stock market closes early for New Year
• 2pm GMT: CaseShiller index of house prices for October
We'll be tracking all the main events throughout the day … |
If crypto is incorporated into financial system, we'll be lucky to avoid contagious collapse 
US media is in big trouble – but I find far less to be worried about at the Guardian 
