- All Multi-Asset class funds and portfolios positive over 2024
- Japanese equities finish at best year-end close in three decades
- Fixed income markets faced headwinds in December
All the Liontrust Multi-Asset class funds and portfolios ended 2024 having made strong gains over the year, including double-digit returns for those with the most exposure to equities.1 The US’ S&P 500 was up more than 20% for the second consecutive year2 and Japanese equities hit their best year-end in over three decades.3
The gains were in line with our own positive four out of five tactical overall rating for equities, and positive ratings in particular for sub-asset classes such as Japan, UK, emerging market and Asia Pacific ex-Japan equities and US smaller companies. Our Tactical Asset Allocation (TAA) contributed positively to returns over 2024 in our risk-targeted funds.
Global equities provided mixed results in December, however, and the so-called ‘Santa rally’ was absent. While US, UK and European equities drifted, Japan, emerging markets and Asia ex-Japan rose in sterling terms.4
Headwinds for fixed income
Normalisation of monetary policy continued in December with both the Fed and the European Central Bank (ECB) cutting rates by a quarter point but global fixed income faced headwinds as a more hawkish Federal Reserve raised its inflation forecasts and predicted only half a percentage point of cuts in 2025 compared with the full percentage point that was previously forecast in September.5 The extent of rate cuts in 2024 were some way short of market expectations at the beginning of last year, which weighed on global government bonds. We are broadly neutral on fixed income, although we are positive on global high yield and investment grade corporate bonds, and these sub-asset classes delivered solid returns over 2024.
Nevertheless, we believe the worst of the inflation spikes are over for this cycle, and the ECB commented that significant progress had been made in tackling inflation6 while the Bank of England was also optimistic, with its governor Andrew Bailey welcoming recent declines in inflation and predicting four base rate cuts in 2025 if the UK economy performs as expected.7
Japan’s stock market reached its best year-end close since 1989 with the Nikkei hitting just under 39,000 in the final trading session of 2024.8 The MSCI Japan Index was up 10.5% over the year in sterling terms.4 A weak yen has boosted the attractiveness of Japan’s exports this year and corporate earnings hit an all-time high in the third quarter. We are positive on the tactical outlook for Japan: it is in an inflationary environment for the first time in a couple of decades, which should encourage more consumption, and there is an improving corporate picture after years of underperformance.
Short-term political upsets
Politics caused short-term jitters once again. A parliamentary vote of no confidence in the French prime minister prompted the need for new elections. The short-term impact of the political situation is clear: while Europe ex-UK equities were up 2.7% in sterling terms in 2024,4 French stocks were down around -3%.9 Investors’ confidence in Europe generally has been by knocked by the continent’s sluggish economy and potential tariffs being imposed by the new Trump administration. We reduced our tactical rating for European equities to a negative two out of five in our fourth quarter 2024 TAA review, having been neutral since early 2023.
Asian stocks also suffered from political tremors early in December when South Korean president Yoon Suk Yeol declared martial law,10 although the move was quickly reversed. Asian stocks were later boosted when China announced a positive change in its stance on monetary policy for the first time in 14 years, which investors took to mean that the country’s government was taking the economic situation seriously.11 Over 2024, Asia Pacific ex-Japan equities delivered 13.0% in sterling terms.4
Positive on markets
Financial markets still offer good long-term opportunities, and investors should consider the benefits of diversification in helping them to reduce sensitivity to any particular asset class. It is not a given that US equities, and especially the Magnificent 7, will continue to be the main driver of returns in 2025.
1Source: Financial Express, 3 January 2025
2Source: Financial Times, 31 December 2024
3Source: Nikkei Asia, 30 December 2024
4Source: Bloomberg, 3 January 2025
5Source: Financial Times, 19 December 2024
6Source: Financial Times, 12 December 2024
7Source: Financial Times, 4 December 2024
8Source: Financial Times, 27 December 2024
9Source: Financial Times, 29 December 2024
10Source: Financial Times, 4 December 2024
11Source: Financial Times, 9 December 2024
KEY RISKS
Past performance is not a guide to future performance. The value of an investment and the income generated from it can fall as well as rise and is not guaranteed. You may get back less than you originally invested.
The issue of units/shares in Liontrust Funds may be subject to an initial charge, which will have an impact on the realisable value of the investment, particularly in the short term. Investments should always be considered as long term.
The Funds and Model Portfolios managed by the Multi-Asset Team may be exposed to the following risks:
Credit Risk: There is a risk that an investment will fail to make required payments and this may reduce the income paid to the fund, or its capital value. The creditworthiness of a bond issuer may also affect that bond's value. Bonds that produce a higher level of income usually also carry greater risk as such bond issuers may have difficulty in paying their debts. The value of a bond would be significantly affected if the issuer either refused to pay or was unable to pay; Counterparty Risk: The insolvency of any institutions providing services such as safekeeping of assets or acting as counterparty to derivatives or other instruments, may expose the Fund to financial loss; Liquidity Risk: If underlying funds suspend or defer the payment of redemption proceeds, the Fund's ability to meet redemption requests may also be affected; Interest Rate Risk: Fluctuations in interest rates may affect the value of the Fund and your investment. Bonds are affected by changes in interest rates and their value and the income they generate can rise or fall as a result; Derivatives Risk: Some of the underlying funds may invest in derivatives, which can, in some circumstances, create wider fluctuations in their prices over time; Emerging Markets: The Fund may invest in less economically developed markets (emerging markets) which can involve greater risks than well developed economies; Currency Risk: The Fund invests in overseas markets and the value of the Fund may fall or rise as a result of changes in exchange rates. Index Tracking Risk: The performance of any passive funds used may not exactly track that of their Indices. Any performance shown in respect of the Model Portfolios are periodically restructured and/or rebalanced. Actual returns may vary from the model returns.
The risks detailed above are reflective of the full range of Funds managed by the Multi-Asset Team and not all of the risks listed are applicable to each individual Fund. For the risks associated with an individual Fund, please refer to its Key Investor Information Document (KIID)/PRIIP KID.
DISCLAIMER
This is a marketing communication. Before making an investment, you should read the relevant Prospectus and the Key Investor Information Document (KIID), which provide full product details including investment charges and risks. These documents can be obtained, free of charge, from www.liontrust.co.uk or direct from Liontrust. Always research your own investments. If you are not a professional investor please consult a regulated financial adviser regarding the suitability of such an investment for you and your personal circumstances.
This should not be construed as advice for investment in any product or security mentioned, an offer to buy or sell units/shares of Funds mentioned, or a solicitation to purchase securities in any company or investment product. Examples of stocks are provided for general information only to demonstrate our investment philosophy. The investment being promoted is for units in a fund, not directly in the underlying assets. It contains information and analysis that is believed to be accurate at the time of publication, but is subject to change without notice. Whilst care has been taken in compiling the content of this document, no representation or warranty, express or implied, is made by Liontrust as to its accuracy or completeness, including for external sources (which may have been used) which have not been verified. It should not be copied, forwarded, reproduced, divulged or otherwise distributed in any form whether by way of fax, email, oral or otherwise, in whole or in part without the express and prior written consent of Liontrust.
