Gold… at the mercy of dollar strength?
Gold prices opened December on a subdued note, slipping to approx. $2,630 an ounce as the U.S. dollar strengthened and market optimism for a Federal Reserve interest-rate cut in December waned. The pullback follows an election period where gold's safe-haven appeal was expected to rise, but instead faltered amid shifting market dynamics. Investors remain cautiously optimistic about gold’s trajectory in 2025, though the strength of its recovery may be less pronounced than previously forecast. Meanwhile, silver also faced some pressures weighed by Trump-era trade policy uncertainties and a robust dollar. However, potential stimulus measures from China targeting its sluggish property sector could offset some downside risks. The market now eyes key U.S. economic data and the Fed’s December meeting for further direction.


Is the US this exceptional?
US stock markets have led global returns in 2024, with the S&P 500 returning vastly more than major peers. It was a very similar picture in 2023, nudged only slightly by Japan's TOPIX index, but the index found itself no.1 in 2018, 2019 and 2021, contributing to a formidable track record. So impressive in fact that it has grown to encompass over 72% of the MSCI World benchmark, a popular barometer of global equity returns. November continued this incredible trend, with the S&P 500 returning 5.9%. Begging the question, just how exceptional is the US?  A premium in expected earnings growth, compared to global peers is priced in, somewhat exacerbated by Trump's 'America First' agenda. Given the current outlook, the US shows no signs of slowing but investors must remain data dependent, especially when it comes to any potential return of inflation, which may be one effect of proposed tariffs.


Are you prepared for declining interest rates?
With the initiation of interest rate cuts starting mid-year, led by the ECB, savings account returns—closely tied to the risk-free rate—are following suit. This marks the conclusion of an unusual cycle of interest rate hikes, during which the global economy demonstrated remarkable resilience. This economic strength has allowed central banks to adopt a measured approach to cuts, reducing immediate recession risk. For income seeking investors, the elevated interest rate environment presented straightforward opportunities. However, as rate cuts continue, the declining risk-free rate will likely prompt a reassessment of income strategies. Looking ahead, a diversified portfolio that balances income generation with potential for capital growth could be essential. Investors can mitigate the effects of falling rates and position their portfolios for long-term stability and growth, even as the financial landscape evolves.