Last year at this same time we already anticipated that 2024 could be a good year if the “Cycle of Presidents” was fulfilled. Historically, the North American stock market has performed positively in years where the president faces re-election since They focus their efforts on the economy to emerge victorious in re-election. As you well know, it has worked economically, but for other reasons Mr. Biden has not achieved his objective.
The key to the year has been that inflation has been considered controlled, the main central banks have begun a cycle of rate cuts and of course and above all the behavior of the Magnificent 7. The S&P500 closes with a 23% profitability, but if we take the S&P500 weighting all the values with the same weight, its profitability has barely been above 10%. Europe, as usual, with very discreet returns, the Stoxx 600 a poor 6%, the political crisis in France and the strong crisis in the Automobile sector has weighed heavily, but Germany and Spain have performed very well with returns around 18%. We have once again seen a very concentrated market where a few stocks have contributed most of the returns: Mag7 in the US, SAP and Rheinmetall on the DAX and IAG, Inditex and the Banking Sector on the IBEX.
Gold and Bitcoin are the star assets of this year, geopolitics, the accumulation of gold in some countries have caused both Gold and Bitcoin to accumulate great gains. Bitcoin has been favored by a greater perception of a safe haven asset similar to Gold and the strong support received by Mr. Trump’s new administration where he has even raised the possibility of having Bitcoins as a strategic reserve. Is it the final boost for Bitcoin? We will see throughout this year, it seems contradictory to us that the philosophy behind Bitcoin speaks of decentralization and liberation of central banks and yet the majority of Bitcoin accumulates in a few accounts. In the end, the value will be determined by what you want to give it and the positioning of governments towards it will have a lot to say. We believe that the adoption of Bitcoin as a strategic reserve is due more to a movement by the new Trump administration in defense of the dollar. . However, Bitcoin has a very high correlation with the Nasdaq and with the liquidity of the system, we can affirm that it has become an asset with a behavior very similar to other financial assets and very dependent on the reviled “FIAT” currencies, its performance has been very similar to that of an ETF on the “magnificent 7”.
We cannot finish without talking about Nvidia and AI, just like last year, it still has no competition in the manufacture of chips for AI, the new industrial revolution of the 21st century, its profits multiply at the same time as its price in stock market, one of the big questions for next year is whether this evolution accelerates, for this it will be key for AI to begin to return economic profitability and demonstrate that it is not a bubble. For the year 2025 we have three main axes to monitor: inflation; to Mr. Trump and Geopolitics, any of the three alone can derail the current scenario of complacency that prevents recession, the three are closely related to each other.
We believe that next year can be very interesting, black and white swans can combine, but a priori a world of falling interest rates combined with an incipient new industrial revolution is a very positive combination, in the past when both have occurred Effects we have seen rising markets for long periods of time. With permission from geopolitics and Mr. Trump.