December was a negative month for the global stock markets – the index MSCI All-Country World Equity closed 2024 with a monthly loss of 2.5% (in USD), but still finished the year with a total gain of almost 16%. For the world equities this was the fifth year, in the last six, with double-digit returns. In the United States, equity indices retreated in December because of some hawkish comments by the Fed that future rate cuts might be withheld in view of the persistent inflation. This caused a large drop not only among US stocks, but also among fixed income instruments – the long-bond yields went up by nearly 50 basis points (0,5%) for the month (bond yields and bond prices move in opposite directions). Yet, another interest rate cut at the beginning of December, along with a favorable inflation report for the month, helped the US markets to partially recover later. The US dollar continued to strengthen against other currencies during the month, and this additionally worsened the losses from international markets. Europe held relatively well in December as core inflation showed signs of declining and economic growth stayed positive— The Old Continent has long been flirting with recession, but it looks like the region was not likely to enter one just yet. The European Central Bank (ECB) reiterated that spurring economic growth now remained its highest priority (rather than the fight with inflation). In Asia, Chinese shares partially recovered from the equity selloff after the US elections and the prospects of new tariffs. Japanese stocks also rallied on news of government stimulus, but the yen’s weakening left returns flat for international investors. Overall, for the month, sector returns were widely dispersed, led by Communication Services and Consumer Discretionary stocks, while Materials and Energy lagged. At the end, the equity rally in the US was relatively narrow again, as just seven Mega-cap tech stocks accounted for more than half of the S&P500’s total return for 2024. Investors’ clear appetite for risk spilled over into the fixed income markets. High-yield bonds (aka “junk” bonds) were the top performing sector for the fourth year in the row. Against the backdrop of geopolitical tensions, central bank decisions, and fluctuating inflation, government bond yields rose: an aggregate index of global government bonds returned -3.1% over 2024. European “govies” outperformed US Treasuries as the bleaker economic outlook in Europe translated into greater urge for a downward direction for interest rates.  US Treasuries still delivered moderate positive returns over the year. The yield curve steepened – the yield of the benchmark 10-year U.S. Treasury note finished 2024 around 4.57% (having started at 3.88%).
US stocks declined in December. The month started with an expected quarter-of-a-percent interest rate cut by the Fed that, together with the favorable inflation report, added to the upward momentum in equities following the US election results. The sell-off, though, was triggered by some chilling comments by the Fed Chair, about drastically fewer rate cuts in 2025. Despite the bad ending month, 2024 was a stellar year for the American investors and business. The S&P500 hit 57 record all-time highs during the year and was the best performing equity market in the world, finishing with a total return of 23,3% (in USD). This was the second year in a row that the flagship index generated a gain of more than 20% – making it the strongest two-year result in almost 30 years. However, the equities rally was narrow: the “Magnificent Seven” (Apple, Amazon, Google, Nvidia, Microsoft, Tesla, Facebook) stocks accounted for more than 53% of the index’s overall return. The year was marked by an ongoing AI enthusiasm that buoyed all related stocks – the composite NASDAQ index closed 2024 with a gain of 28,6%, and celebrated the sixth time in the last eight years that this tech-heavy index has returned more than 20%! Indeed, the American economy continues to be the envy of the world - annualised GDP growth for the first three quarters of 2024 averaged 2,6% (with 3.1% in Q3); the labor market rebounded after some distortions due to strike action and hurricanes at the end of the summer; earnings reports show gradual broadening of the economic momentum beyond Magnificent Seven. Still, although US equity performance varied significantly across sectors, for a second year in a row Communication Services and Information Technology were by far the top performers, generating in 2024 over 40% and 36%, respectively. Financials also did well, boosted by the high-interest rate environment and the prospects for deregulation following the Trump election. Materials had the bottom spot, posting a slightly negative result (in USD). During the year, the U.S. bond market experienced significant volatility due to shifting outlooks for inflation and monetary policy. Investment grade credit could not outperform lower quality debt, and the government bond yields generally rose. The important 10-year U.S. Treasury note yield moved between 4.73% and 3.61% throughout the year, ending towards the high end, at 4.57% – a notable rise over last year’s finish (3,88%),  reflecting market uncertainty surrounding the Fed's future actions and potential inflationary pressures from Trump’s policies. 
European equity generally fell in December. The broad pan-European equity index Stoxx600 lost about half-a-percent over the month in local currency (EUR), and almost 3% in the fourth quarter. Eurozone shares declined in Q4 due to recession fears, political instability, and trade war concerns. The European economic momentum slowed down significantly during the year, particularly impacting the manufacturing sector, affected by high energy costs, damaging regulations, and reduced export demand (especially from China). Exacerbating the situation, the continent’s biggest economies, Germany and France, faced political turmoil, with governments collapsing in both countries, adding further to the political instability and economic uncertainty. The ECB has cut its key interest rates four times this year in response to lackluster growth – the last, by 25 bps in December, as expected. Growth in the UK also slowed, causing the Bank of England to adopt a more relaxed stance, and the British pound retreated. UK equities fell too in December due to concerns about the macroeconomic outlook, with signs of weakening job market conditions and slowing economic growth. Overall Europe is under-represented in the field of AI stocks, which brought strong equity returns in 2024. As a result, European equities underperformed their American counterparts – the Stoxx 600 finished the year with return of just 6% vs. over 30% of S&P500 in EUR. In the last month of the year Denmark was the worst performing national market globally, as the biggest Danish (and European!) company, Novo Nordisk, suffered a share price plunge of more than 20% after weak results from its weight loss drug. In general, the worst performing sectors in Europe for the year included Materials, Energy and Consumer Discretionary, while sectors posting the biggest gains included Financials and Communication Services. Revealing all this economic weakness meant that European bonds outperformed their international counterparts. With Europe’s core struggling (Germany, France), the European periphery performed relatively strongly – and this allowed the spreads of peripheral debt to tighten. Interestingly, the political unrest in France caused French bond yields to surpass Greek ones for the first time ever. French bond spreads widened further, surpassing Spanish spreads for the first time since the global financial crisis in 2008. Closing the spread, the Italian bonds were the best performing sector with returns of 5.3% over 2024. In the UK, the Labour government's budget increased taxes, raising concerns over borrowing – the British pound depreciated and the 10-year gilt yield rose; UK gilts were the worst-performing fixed income sector for the year. Finally, the benchmark 10-year German Bund yield closed 2024 at 2.37%, while the Euro weakened against the dollar, reflecting the growing economic divergence on the two sides of the Atlantic.
December was an excellent month for the Bulgarian Stock Exchange, and this comes at a time when the world stock markets saw declines. The flagship SOFIX index added a robust 5,5% for the month to close with a 16,7% return for 2024 (in BGN), while the broader BGBX40 rose a more modest 3,45% for the month and over 8,8% for the year. Trading was marked by the festive mood at the end of the year, but with a fairly solid volume of nearly BGN 230 million - more than double the volume of December last year. One initial public offering (IPO) was successfully completed during the month - that of online gaming company Global Gaming Solutions. The company raised more than BGN 1.3 million on the small-cap beam market - this marked the 19th successful IPO on the "junior" segment of the BSE. Otherwise, in terms of return on the local market, the best-performing company for December was the financial-insurance holding Eurohold Bulgaria AD, which recorded an increase of over 34%, and among those with the biggest drop was the private equity fund Eleven Capital AD, whose share price fell by almost 8%.

Source: Bloomberg.