State of World Financial Markets at the Close of 2024

Bond Markets

The bond market rebounded in 2023 following the worst bond market ever in 20221. Fixed-income returns were positive, with bonds that trade with a credit spread performing better than U.S. Treasuries1. The yield curve became further inverted throughout 2023, with short-term interest rates rising as the Federal Reserve hiked the federal-funds rate. Investors were best served in longer-duration bonds in 20241. The Federal Reserve is expected to begin easing monetary policy in 2024 by lowering the federal-funds rat1. Bonds that trade with an additional credit spread over equivalent maturity U.S. Treasury bonds performed the best.

Stock Markets

Global stocks outperformed bonds in 2024. World economic growth cooled to 2.6% in 2024, from an estimated 3% this year. Despite this, global equities set to rise higher on easing recessionary concerns. Barclays expects mid- to high single-digit equity returns in both the US and Europe next year. In the US, services-oriented and energy stocks appear attractive. Barclays also favors value over growth equities, given high exposure to real rates and low international sales exposure. European stocks are trading at a premium discount that could prompt investors to diversify. Despite the apparent slowing among 16 of US states’ economies, markets are upbeat heading into year-end. The stock market rallied in November and forecasts for 2024 are relatively upbeat.

Commodities Markets

The World Bank commodity price index is expected to fall 4 percent in 2024, following a projected decline of nearly 24 percent in 2023, the sharpest drop since the pandemic. Energy prices are expected to decline by almost 5 percent in 2024 and remain relatively stable in 2025. Three commodities could take off in 2024: crude oil, copper, and grain. Most analysts reckon that new supply will combine with slow economic growth to cause a gradual decline in oil price, from more than $90 in September 2023 to $80 a barrel or less during 20241. Copper prices fell during 2023 because of low Chinese growth. The market for grain is the third area to watch.

As we move into 2025, these trends and others will continue to shape the global financial landscape. It’s clear that the world is facing numerous challenges, but with every challenge comes the opportunity for change and progress.