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2024: A year in review

18 December 2024
Paul Jackson
Paul Jackson
Global Head of Asset Allocation Research
Uncommon truths

Welcome to Uncommon Truths, Paul Jackson and Andras Vig’s regular in-depth look at the big topics impacting markets.

Most central banks started easing in 2024 and this seemed to contribute to attractive asset returns (US election results also helped some assets, we think). Precious metals and equities were the best performing global assets, while government bonds alone generated negative total returns.

Judging by Bloomberg's most-read news items, the event of the year was the market volatility of early August, which led to the Fed's 50 basis point cut in September (in our opinion). Geopolitics was a long way down the list, though we think it contributed to the strength of gold (see chart).

2024 was less rewarding for the Aristotle List of 10 surprises, but over many years we have learned to take the rough with the smooth. The list for 2025 will be published on 12 January and important in our thoughts will be the extent to which recent market leadership can continue.

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FAQs

The optimal portfolios are theoretical and not real. We use optimisation processes to guide our allocations around “neutral” and within prescribed policy ranges based on our estimations of expected returns and using historical covariance information. This guides the allocation to global asset groups (equities, government bonds etc.), which is the most important level of decision. For Uncommon Truths, the optimal portfolios are constructed with a one-year horizon. 

We’ve chosen to include equities, bonds (government, corporate investment grade and corporate high-yield), real estate investment trusts (REITs, to represent real estate), commodities and cash, on a global level. We use cross-asset correlations to decide which decisions are the most important. 

Using a covariance matrix, based on monthly local currency total returns for the last five years, we run an optimisation process that maximises the Sharpe Ratio. Another version maximises Return subject to volatility not exceeding that of our Neutral Portfolio. The optimiser is based on the Markowitz model. 

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