2024 Year-End Review of Major Asset Classes: US Asset "Exceptionalism," Strengthening Secular Trends, and Investment Landscape Under Global Capital Rotation

2024 Year-End Review of Major Asset Classes: US Asset "Exceptionalism," Strengthening Secular Trends, and Investment Landscape Under Global Capital RotationAs 2024 draws to a close, a review of the global financial markets reveals three core factors driving major asset price fluctuations: US asset "exceptionalism," the strengthening of secular trends, and frequent global capital rotation. In an environment rife with uncertainty, certainty and growth have become scarce assets, profoundly influencing investment strategy choices and asset allocation

2024 Year-End Review of Major Asset Classes: US Asset "Exceptionalism," Strengthening Secular Trends, and Investment Landscape Under Global Capital Rotation

As 2024 draws to a close, a review of the global financial markets reveals three core factors driving major asset price fluctuations: US asset "exceptionalism," the strengthening of secular trends, and frequent global capital rotation. In an environment rife with uncertainty, certainty and growth have become scarce assets, profoundly influencing investment strategy choices and asset allocation.

I. Macroeconomic Environment: Global Transformation and Mismatches

2024 witnessed a period of profound global economic transformation, characterized by significant mismatches. The US economy exhibited remarkable resilience; however, post-election policy uncertainty increased, making economic growth and inflation rebalancing central market concerns. China's economy displayed low inflation, with continued efforts to stabilize growth effectively mitigating tail risks. In contrast, Japan showed signs of re-inflation, with the Bank of Japan bucking the global trend of interest rate cuts, while political instability added to market uncertainty. The European economy faced a competitiveness crisis, limiting the resilience of its economic recovery.

• Notably, Spain emerged as a top performer among developed economies. Its proactive pursuit of structural reforms has enabled long-term sustainable economic development. According to data compiled by The Economist on five key economic and financial indicators (GDP, stock market performance, core inflation, unemployment rate, and government deficit) across 37 major developed countries in 2024, Spain ranked first, with economic growth and job growth exceeding even that of the United States. Spain's economic success warrants in-depth study; its industrial structure shifted from traditional manufacturing to a focus on services, leveraging tourism to drive economic growth. Furthermore, its open policy towards immigration and proactive investment attraction efforts have injected vitality into its economy. A thriving tourism sector and employment growth in immigration-related fields have boosted local housing prices, while investment and production have provided strong support for domestic demand-driven economic growth.

II. Asset Performance: Seeking Certainty in Market Trends

The 2024 market continued its focus on "seeking certainty." The uncertainties surrounding Federal Reserve rate cuts, the US election, and Chinese policy maneuvering gradually resolved, demanding increased sophistication and flexibility in investment operations. Rapid global capital rotation and volatile international geopolitical conditions further amplified market volatility.

2.1 Leading Assets: Bitcoin, Gold, US Equities, and Chinese Long-Term Bonds

Leading asset classes in 2024 included Bitcoin, gold, US equities, and Chinese long-term bonds.

• Bitcoin: Bitcoin acted as a risk asset for most of the year. Its price was primarily driven by its deflationary nature, regulatory easing following Trump's return to power, and strict supply constraints. Increased acceptance of cryptocurrencies in developed countries like the US also supported Bitcoin's price rise.

• Gold: As a safe-haven asset, gold's price surge stemmed from geopolitical instability, the US rate-cutting cycle, concerns about the US dollar monetary system due to persistent debt issues in developed nations, and central bank gold purchases in emerging markets. Gold prices reached record highs in 2024.

• US Equities: Despite the high-interest-rate environment, US fundamentals remained resilient, with US equities leading the rally. This was driven by the dual forces of AI-driven corporate earnings growth and a soft-landing rate-cutting cycle. However, periods of crowded trades experienced temporary corrections.

• Chinese Long-Term Bonds: Domestic interest rates continued to decline, price signals remained weak, the real estate market remained in a downturn, and a loose monetary policy, coupled with increased institutional allocation pressure, led to high capital gains from duration strategies, making Chinese long-term bonds stand out in 2024.

2.2 Lagging Assets: Domestic Commodities, the Euro, and Crude Oil

Lagging assets in 2024 included domestic commodities, the Euro, and crude oil.

• Domestic Commodities: The continued cooling of the real estate market, coupled with intensifying supply-demand imbalances, led to greater emphasis on real-world conditions in commodity markets, resulting in a significant correction in domestic ferrous metals.

• Euro: Europe's economic recovery lagged significantly behind that of the US. Fiscal austerity measures in countries like Germany presented tail risks, leading to a weakening Euro due to relative value differentials.

• Crude Oil: High interest rates suppressed demand-side drivers, while supply-side pressures arose from OPEC and potential US production increases. Combined with Trump-related trading factors, crude oil prices remained weak.

III. Industry and Individual Stock Levels: Reflection of Long-Term Trends

The performance of leading assets reflects profound shifts in long-term trends:

3.1 AI Technology Industry Chain: In the second year following the launch of ChatGPT, market trading became more rational, but its adoption rate far exceeded any previous technological revolution. Large technology companies with platform advantages and companies with barriers to entry in specific vertical markets still hold significant advantages. The AI revolution has sparked a "technological arms race" among companies, with exponential growth in computing power demand. Hardware manufacturers (such as Nvidia) and companies providing infrastructure services (such as Vistra Energy) have benefited significantly. The US Mag7 tech stocks also led the US stock market, making long positions in US tech stocks the most sought-after trading strategy in 2024. Similar investment opportunities emerged in the domestic market, such as Cambrian Technology.

3.2 China's Emotional Consumption Chain: Despite a slight decline in consumer sentiment, niche sectors such as emotional consumption, self-indulgent consumption, and fan economies, particularly those with market advantages and barriers to entry, have shown strong growth. "Guzi Economy," representing self-indulgent consumption, has experienced rapid development. "Guzi products," based on two-dimensional IPs, have created high added value and experienced rapid market growth. Leading companies such as Pop Mart have consistently exceeded expectations, with significant stock price increases.

3.3 Safe-Haven Assets in Uncertain Times: The past two years have focused on seeking certainty, with high-dividend assets (such as precious metals and bank stocks) becoming preferred assets in a low-interest-rate and low-risk environment. The banking sector's annual increase exceeded 40%, demonstrating significant outperformance. This could be attributed to its superior risk-return characteristics, attracting low-risk seeking funds like insurance capital, as well as its relatively stable operations that can smooth earnings, making it an attractive investment for risk-averse investors.

IV. Market Pricing Power and Investor Behavior

In 2024, market pricing power changed hands several times, with significant differences in investor flexibility and allocation capabilities. Passive and active funds were favored. Frequent global capital rotation reflected widening valuation gaps between different assets, highlighting the crucial importance of flexible investment strategies and the ability to rapidly respond to market changes.

V. Conclusion

The 2024 major asset market presented both challenges and opportunities. US asset "exceptionalism," the strengthening of secular trends, and global capital rotation profoundly impacted asset price trends. Seeking certainty and growth assets became crucial in this uncertain environment. Investors need to closely monitor macroeconomic changes and enhance their investment sophistication and flexibility to gain a competitive edge.