2024 Market Wrap and 2025 Outlook
Table of Contents
2024 Market Wrap and 2025 Outlook
10 Feb 2025
2024: A Great Year for Kōura Member
If you had an aggressive Kōura KiwiSaver portfolio for all of 2024, you likely saw returns over 20%. Even better, if you included Bitcoin, your returns may have exceeded 30%—thanks to Bitcoin’s massive 142% gain. Despite the negative news about New Zealand’s economy, global markets thrived, boosting Kōura members' balances.
Breaking Down the Returns
- Kōura US Equity Fund: Up 33% in 2024*
This fund, which makes up over 50% of many growth portfolios, benefited from a strong US market (S&P 500 up 25%). Our focus on sustainable investments (like Nvidia) and a strong US dollar helped us outperform. Surprisingly, the S&P 500’s 25% return isn’t unusual, with returns above 20% in five of the last eight years. This highlights the power of large tech companies that dominate both our lives and the stock market. The US market thrived due to excitement around Artificial Intelligence, falling interest rates, and a resilient economy. - Kōura Rest of World Fund: Up 15% in 2024*
This fund invests in Japan, Europe, the Middle East, and Hong Kong.
Japan had a standout year, with a 26% gain driven by inflation (seen as positive there), high tech exposure (around 40% of the market), and a weak yen boosting exports.
Europe struggled—Germany is in recession, France likely too. Southern countries like Spain, Italy, and Greece are now key growth drivers. The region faces challenges from high energy costs and trade tensions, with political and economic uncertainty.
- Kōura Emerging Markets Fund: Up 21% in 2024*
This fund covers China, Taiwan, Korea, India, and more.
Taiwan (22%) and India (18%) were the top performers. India’s growth is fuelled by global shifts away from China, while Taiwan’s semiconductor industry benefits from the AI trend.
China continues to struggle despite multiple stimulus attempts, trade tensions impacting its core manufacturing sectors, a shrinking population, and an economy needing major restructuring.
- Kōura NZ Equity Fund: Up 6.3% in 2024*
New Zealand’s economy lagged, facing the worst per capita recession since the early 1990s. We’re still feeling the effects of post-Covid spending and long-term poor economic policies. The government is trying to control finances with spending cuts, but bold reforms are needed. Simply tinkering around the edges won’t fix deep-rooted issues.
- Kōura Bitcoin Fund: Up 142% in 2024*
Bitcoin surged, driven by new Exchange Traded Funds (ETFs) launched in January and another boost in November with Donald Trump’s election, promising crypto-friendly policies. These ETFs made Bitcoin accessible to everyday investors, fuelling demand. The success of these ETFs—attracting over $50 billion—marks the most successful ETF launch ever.
Key Questions for 2025
- Will the US Market Crash? Unlikely. Despite high valuations (P/E ratio at 27x vs. the historical 16-17x), top tech companies are highly profitable. These companies deserve their premium. Plus, with Trump in the White House—seeing the market’s success as key to his presidency—any market wobbles will likely trigger quick corrections.
- Can the US Economy Keep Outperforming? Yes. Government deficits around 7% of GDP, strong growth (2.8% in 2024), and a culture of innovation will continue to fuel performance. The big question is whether “America First” policies help or hinder long-term growth.
- Will the AI Boom End? Not yet. While new competitors emerge, the demand for AI infrastructure will keep growing. We’re still in the early stages of AI’s development, with many changes ahead. The winners are likely to change, maybe 2024's darlings (Nvidia and Open AI) become usurped by others.
- Is China Back on Track? No. Challenges like population decline, a weak property market, and trade tensions will continue. China needs to shift towards a service and tech-driven economy, which will take time and won’t create as many jobs as manufacturing lose. Expect more pain in China.
- Will Bitcoin Keep Booming? Probably stable, with Trump’s support acting as a price floor. Expect it to trade between US$80,000 and $120,000 unless new demand arises.
- Can New Zealand Recover? Not soon. The current situation reflects decades of poor economic management. A massive infrastructure push and bold economic reforms are needed. Growth will likely remain weak, but it may allow the Reserve Bank to cut interest rates more than other countries.
- How Low Will Interest Rates Go? New Zealand’s slow growth could allow for deeper rate cuts compared to global peers, providing some relief to the struggling economy. Though don't bank on them going too low. It would be surprising if mortgage rates fall below 5%.
Final Thoughts
2024 was a stellar year globally, but caution is warranted heading into 2025. The shadow of Donald Trump's presidency introduces significant uncertainty, with unpredictable economic and geopolitical impacts. His "America First" approach, aggressive trade policies, and volatile leadership style could trigger global instability.Markets often struggle after strong years like 2024. High valuations, investor complacency, and overreliance on tech giants heighten risks. A correction wouldn’t be surprising. While the optimism of 2024 was well-earned, history teaches us that markets rarely move in straight lines. Be prepared for volatility, stay diversified, and don’t let the highs of 2024 cloud judgment for 2025.
*All returns are for the 12 months ended 31 December 2024 and are before tax and after fees. These returns are abnormally high in a historical context so may not be repeated.
*Past investment performance is not a reliable indicator of future performance as investment markets can be volatile. It is important to focus on long-term financial goals rather than short-term market movements or recent performance trends.
*The views and opinions in this article are those of Rupert Carlyon. This content is for informational purposes and should not be taken as financial advice.