📈 2024 Market Review: The Big Picture Before Diving Deeper
A 2024 Market Perspective: Key Trends and Insights
Last week, we started looking at thematic clusters by breaking down the key peer groups in each one. This gives us a good foundation to dive deeper into their dynamics and performance trends. Before we get into how megatrends are performing in 2024, we first need to set the baseline by reviewing how the overall equities market has done this year.
Disclaimer
This newsletter is for informational purposes only and should not be considered investment advice. All investments carry risk, and past performance is not indicative of future results. Please consult a financial advisor for personalized recommendations.
2024 was a very good year for global equities
The iShares MSCI ACWI ETF—referred to as “ACWI” from here on—is a common proxy for global equities. 2024 was a strong year, with ACWI delivering an 18% return in USD terms.
As the chart shows, there were some short-term corrections, but the overall trend remained steadily upward.
Comparing Annualized Performance to Previous Years
We can all agree that an 18% return sounds good—but how good is it really?
To put this into context, I’ve introduced a visualization tool that we’ll also use in the coming weeks to analyze the performance of thematic funds.
This tool is called a box plot, and it helps us visualize annual performance over the past 25 years. You’ll find a full explanation in the image above, but here are a few key takeaways:
On the left side, we see the worst outlier—a 42% decline in 2008.
On the right side, the strongest outlier—a 35% gain in 2003.
The median annual performance over the past 25 years is marked in the middle with a bubble—14%.
Last year’s 18% return is also highlighted, showing it was well above the historical median.
In short, 2024 was a very strong year, and that’s an important context to keep in mind.
ACWI Sector Performance
Our reference point for 2024—the 18% return—is flagged at the bottom of the chart. The ACWI consists of multiple sectors, and this past year saw significant performance dispersion across them.
Outperforming Sectors
Communication Services – Companies like Meta, Alphabet, Netflix, Tencent, AT&T, and Disney had a strong year. Consumers proved more resilient than expected, continuing to spend on digital content, which drove profits for these companies.
Information Technology – Standout performers Nvidia, Broadcom, and TSMC made major contributions to this sector’s success, primarily fueled by the AI boom and the growing need to build supporting infrastructure.
Financials – JPMorgan Chase, Berkshire Hathaway, Visa, and Mastercard benefited from a more favorable economic backdrop and the potential for a looser regulatory environment under a new Trump administration.
Underperforming Sectors
Materials – This sector posted negative performance, as steel and commodity chemicals companies struggled with weak demand, pricing pressure, and rising input costs.
Healthcare – The sector was flat for the year, with stocks coming under pressure in Q4 due to market concerns over potential regulatory disruptions under a Trump administration.
Energy – Declining oil prices negatively impacted profitability across the sector, weighing on performance.
Key takeways
Let’s take a moment to summarize the key patterns we’ve identified in 2024:
U.S.-based tech and tech-related stocks were once again the driving force behind this year’s stellar market performance.
The AI boom fueled a surge in various business models and pushed stocks to new highs.
Performance was concentrated in a handful of stocks—the so-called Magnificent Seven.
External factors, such as declining commodity prices (e.g., oil and chemicals), pressured company economics and weighed on share prices.
Regulatory uncertainty—especially in healthcare—also negatively impacted sector performance.
A key lesson from 2024 is that it’s always advisable to focus on companies with strong control over their economics. Every business is exposed to external factors beyond its control, but the difference between a price taker and a price maker is critical. Price takers must accept whatever the market is willing to pay for their products, making them more vulnerable to volatility. Price makers, on the other hand, have pricing power due to differentiated offerings, making them more resilient. We’ll keep this in mind as we continue our analysis.
Setting a Performance Benchmark for Thematic Funds
One key takeaway we need to explore further is how to establish a reasonable performance hurdle for thematic funds and ETFs in 2024.
The ACWI’s performance is becoming increasingly skewed due to the dominance of a small group of stocks—the Magnificent Seven. Let’s dive deeper into this in the next newsletter.
As shown in the chart, these seven exceptional companies have outperformed the market not just by a few percentage points, but by multiples. The most extreme example is Nvidia, which has delivered 14x the market’s performance since 2019.
We’ll break down this phenomenon in more detail next week!
Agenda for the Coming Weeks
We have an exciting five weeks ahead as we dive deeper into market trends and thematic investing.
Now that we’ve established a solid understanding of overall market performance, our next step is to analyze the Magnificent Seven and their outsized impact on global equity returns. After that, we’ll take a closer look at the performance of our megatrend clusters and sub-clusters.
Here’s the schedule:
📊 2024 Market Review: The Big Picture Before Diving Deeper – TODAY!
💡 The Magnificent 7 Effect: How It Distorts Performance & What Defines ‘Good’ Returns – Feb 27
🌍 Multi-Thematic Investing in 2024: Which Funds/ETFs Are Winning? – March 6
🚀 Tech Funds/ETFs in 2024: Capturing Innovation or Falling Behind? - March 13
🌱 Sustainable Investing in 2024: How Funds/ETFs Are Performing in the Green Transition – March 20
🔄 Investing in Societal Change: How Thematic Funds/ETFs Are Adapting in 2024 – March 27
This deep dive will equip you with a comprehensive understanding of the stock market and thematic investment universes, enabling you to make informed decisions when selecting funds or ETFs for your portfolio.
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