fbpx

Online Portfolios: Quarterly Review – Q4 2024

Economic and Market Overview

Financial markets delivered mixed performance in the last quarter of the year amid heightened macroeconomic and geopolitical environment. Although some markets reached all-time highs, however, investors remained cautious, balancing optimism around AI and data centres with caution about potential downward adjustments in the face of economic uncertainty, tariffs, and geopolitical issues going into the next year. Geopolitical events like ongoing Russia-Ukraine war, conflicts in the Middle East, and impeachment of South Korean president after his failed martial law attempt, amongst other events, continued to impact investors’ sentiment towards financial markets in the final quarter of 2024. Bitcoin remained in focus in the last quarter as its price surged from $63000 at the start of October 2024 to $93000 at the end of December with all time high price of $108000 reached in the second half of December. This spectacular performance of the digital token was mainly driven by the Donald Trump’s victory in November elections as he is widely considered pro crypto, and traders are expecting crypto friendly regulations under his presidency.

The US economy remained strong despite high interest rates, however, European and UK economies struggled to show considerable growth amid uncertainties around timing and intensity of potential tariffs, sticky inflation and higher borrowing costs. China’s stimulus policies aimed at supporting economic growth and stabilizing stock markets provided short-term relief, but investors seemed to be more concerned about fiscal reforms and structural issues, especially real estate sector. Macroeconomic picture remained highly uncertain during Q4 where inflation rebounded after showing signs of softness in Q3, making it difficult for central banks to pivot as expected by the market participants. Moreover, jobs market also showed signs of weakening reflecting companies’ cost control measures. After recognizing the changing macro dynamics, central banks turned more cautious on their rate cutting endeavors. Central bank cut the rates less than what the market had expected and provided an indistinct outlook. Although there are still concerns over GDP growth rates in developed economies including Europe, UK, as well as in China, however, the US economy remained strong despite higher borrowing costs for both corporates and consumers.

Looking at the performance of major asset classes in Q4, equities markets provided mixed performance with Japan’s Nikkei 225 and US S&P 500 surging 5.2% and 3.4%, while Europe’s Euronext 100 and the UK FTSE 100 declined by 1.93% and 0.66%, respectively. Such performance was driven by strong economy in the US along with AI and technology optimism, but low economic growth in Europe and UK. Japanese’s equity performance was backed by corporate reforms and optimism. The benchmark for Shariah compliant equities DJ Islamic markets index ended the last quarter flat. On the commodity front, DJ commodity index ended the quarter flat while gold lost 1.35% after having a significant appreciation in previous quarters as US dollar strengthened. Lastly, DJ sukuk index ended the quarter with 1.73% drop in value as yields surged sharply during Q4 amid heightened uncertainty (bonds’ values drop as yields surge and vice versa) while UK GBP depreciated by 5.72% against US dollar.

Performance of Global Assets Q4 2024

Portfolio Commentary

During the last quarter, all our portfolios appreciated in value by over 3% primarily driven by rise in the US equity markets and the depreciation of pound against US dollar by 5.72%, which helped our overweight unhedged position in sukuks, particularly for relatively higher risk portfolios. Year 2024 has been a good year for all portfolios, with our lowest risk portfolio, namely, Defensive delivering an annual return of 4.5% whilst the highest risk portfolio, namely, Progressive growth gained by 13.2% during the year.

Performance of Simply Ethical Online Portfolios in Q4 (01 October 2024 – 31 December 2024)

Year to Date Performance of Simply Ethical Online Portfolios (01 January 2024 – 31 December 2024)

During the quarter, there were no changes made to the investment allocation for any portfolios. Given our cautious view on equity markets, we continue to maintain a relatively higher sukuk allocation particularly for Balanced Growth, Growth and Progressive Growth portfolios. Nevertheless, there are challenges for the fixed income market as well due to monetary policy uncertainties, therefore, we maintain diversification across different asset classes (equities, sukuks and commodities) and regions/markets for all portfolios. We continue to maintain a cautious view on investments, as current market valuation may be difficult to maintain given challenging macroeconomic environment ahead and heightened political uncertainties – both remain a possible risk to the markets.

To learn more about our investment approach and how we can help you, book a free initial consultation with one of our Financial Advisers.

Disclaimer

This article is for information only. Please do not act based on anything you might read in this article. Past performance is not a reliable indicator of current or future returns. This article contains general information only and does not consider individual objectives, taxation position or financial needs. Nor does this constitute a recommendation of the suitability of any investment strategy for a particular investor. It is not an offer to buy or sell or a solicitation of an offer to buy or sell any security or instrument or to participate in any trading strategy to any person in any jurisdiction in which such an offer or solicitation is not authorised or to any person to whom it would be unlawful to market such an offer or solicitation.

When you access a shared link of third-party websites, you are leaving our website and assume total responsibility and risk for your use of the third-party websites. We make no representation as to the completeness or accuracy of information provided at these websites nor do we endorse the content and information contained on those sites.