December 2024 Commentary
Market Overview
On Dec. 18, the Federal Reserve cut interest rates by 25 bps, bringing the target rate to 4.25%-4.5%, and signaled fewer rate cuts for 2025. This year, the S&P 500® missed the “Santa Claus rally,” which is often used as a market indicator for the following year’s performance, despite having a YTD return of 23.31%. In fact, during the last five trading days of 2024, the S&P 500 was down 2.62%, with market uncertainties about tariffs and rate cuts with the new political regime looming. After the Fed’s decision, the Brazilian real plunged to a record low of 6.29 reais per dollar, due to concerns about fiscal deficit, public debt and exports. Additionally, on Dec. 11, Banco Central do Brasil hiked the Selic rate by 100 bps, bringing it to 12.25%, which surprised local markets. In contrast, Mexico’s central bank lowered rates by 25 bps to 10%, citing cooling inflation, slowing employment and lower economic prospects in 2025. On a positive note, Mexico is expected to end the year with a 4.4% GDP growth, according to preliminary estimates of the Dallas Fed.
The Eurostat report released on Dec. 18 indicated that eurozone inflation for November was 2.2%, with Romania, Belgium and Croatia having the highest inflation rates at 5.4%, 4.8% and 4.0%, respectively. The HSBC India Manufacturing PMI came in below estimates at a 12-month low of 56.4 for December due to lower output and new orders.
