2024’s Defining Moments: What They Mean for Your 2025 Investment Strategy

At the start of 2024, I highlighted three major investment themes: war, elections, and interest rates (read more here). Let’s revisit these themes and their latest developments.

In February, I discussed how escalating tensions could amplify market risk sentiment and impact commodity prices. This has proven accurate, as the Ukraine-Russia and Israel-Palestine conflicts have become key drivers, pushing gold prices to a high of $2,790 per ounce by late October. The Ukraine-Russia war remains deadlocked, with little sign of resolution. However, during Trump’s campaign, he pledged to end this war within 24 hours of taking office. With his victory confirmed, the world will closely watch whether he can deliver on this bold promise. Meanwhile, in the Middle East, the Israel-Hamas conflict has spilled over into Lebanon and Iran. Recent reports suggest Israel is expediting peace talks with Lebanon, potentially culminating in a ceasefire deal by January as a symbolic gift for Trump’s inauguration. Reflecting these dynamics, gold prices have retreated since Trump’s win, briefly dipping below $2,550 on November 14. Trump’s ability to influence these conflicts will likely be a key indicator for gold prices in early 2025.

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My February article also covered the major elections in Russia and India in 2024 alongside the U.S. presidential election. In March, Vladimir Putin secured another term as president in a predictable outcome. However, the future of the Ukraine war largely depends on Putin’s decisions. On November 20, in response to the U.S. allowing Ukraine to use long-range missiles against Russian targets, Putin lowered Russia's nuclear weapons usage threshold. This move heightened global risk sentiment, sparking a rebound in gold prices to the $2,700 range. For 2025, gold investors will need to closely monitor Putin’s actions.

In India, Prime Minister Modi successfully secured a third term in office, but his National Democratic Alliance received far fewer votes than expected. This was primarily due to the fact that lower-income groups in India felt they had not benefited from the economic boom and shifted their support to other parties in search of change. Despite this, the Indian stock market reacted positively, with the Bombay Stock Exchange Index (^BSESN) surging from 73,000 in June to a peak of nearly 86,000 in late September. Although the index has since pulled back to around 77,000, it still boasts a nearly 10% year-to-date gain. Recent outflows from Indian stocks coincided with China’s stock market revival initiatives, as global investors reallocated funds. For 2025, emerging market investors should anticipate a shifting market dynamic between Indian and Chinese equities, adjusting their portfolios accordingly.

In late 2023, hopes for U.S. rate cuts were repeatedly delayed. However, the Federal Reserve eventually reduced rates by 50 and 25 basis points in September and November, respectively. Fed Chair Jerome Powell hinted at a more cautious approach moving forward, as rates approach neutral levels. Despite this, the easing cycle reflects cooling inflation risks, providing relief to businesses and individuals burdened by debt over the past two years. With most major central banks (excluding Australia and Japan) joining the easing trend in 2024, sustained momentum in 2025 could breathe new life into global investment markets.

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Looking Ahead

In summary, war remains a significant concern for 2024’s investment landscape, whereas elections and rate cuts have generally been positive for the market. With most asset classes delivering strong year-to-date performance, investors should remain cautious about potential year-end sell-offs as profits are realized. Proactive risk management and thoughtful portfolio adjustments will be key to seizing opportunities in 2025.

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