As we say goodbye to 2024 and hello to 2025, there is little we know about what the next 12 months has in store for us, but what we do know is that Donald Trump will be inaugurated as President of the United States on Monday 20th January 2025.
The opening door
Donald will be the 47th president and this will be his second inauguration as president; his first time being in January 2017. During his first term, most people will remember his stance on immigration and his “border wall” across the US and Mexico border, along with the trade war he instigated with China via the use of tariffs, let alone all the impeachment discussions.
As for his second term, we will have to wait and see. There has been talks that he will try and broker a peace deal between Russia and Ukraine (the suspicion is that he really wants a Nobel Peace Prize).
The one difference, though, between his two terms is that this time the Republicans not only have control of the House of Representatives, but they also control the Senate. What this means is that the Democrats will have less leverage to challenge the policies they disagree with – basically Donald should be able to pass new laws with more ease, so who knows what that will result in.
The closing door
So looking back at 2024 from an investment perspective, it was actually a good year for equities on the whole, and the growth side of the world far exceeded the more defensive sectors such as fixed income and healthcare. Sectors such as energy and materials, the latter of which was negative on the year, also struggled, and even staples couldn’t make double digits.
I am getting rather bored/frustrated at the performance of the “Magnificent 7”, as it seems we always use it as an explanation as to why the multi-manager solutions, or indeed our direct equity mandate, struggle to keep up with the generic markets.
When you look at the cold hard facts, an equally weighted basket of the Magnificent 7 for 2024 returns +63.8% (this is on the back of a +96.6% in 2023, so a huge +222% over the two years given the power of compounding).
The problem is that when you look at the generic world equity index, as at the end of 2024, the weight to these stocks comes in at nearly 24%, so it does skew the returns to some extent.
We talk about the Magnificent 7 but actually the performance has been all about Nvidia, as over the last two years, this stock has returned a whopping +782.6%. Now given that we are valuation sensitive and so are our underlying managers, many of our holdings do not have exposure to this “skyrocket” of a stock, so trying to replicate the 4.7% weight in the index is nigh on impossible. Even the most bullish Nvidia holder in Sanlam Global Artificial Intelligence only has 6.2% allocated to the stock, so when you weight this in our Growth strategy, for example, this comes in at 0.4%.
There was one stock that trounced Nvidia in the last quarter of 2024, and that was Tesla, and the stock is only held in one of our funds, and even then it is only a 3% weight. For the year of 2024, Tesla ended up +63.8%, and all of this happened in the last quarter as Trump appointed Elon as his head of the newly created “Department of Government Efficiency”. Despite the name, the department will not even be a government agency, but due to the cosy relationship between the two men, the stock soared even though there was no fundamental reason as to why it should rally - it was all about sentiment, something which is very hard to predict and invest in.
What does the future hold?
As we have said on numerous occasions, we do not have a crystal ball so cannot predict anything with certainty (and having Trump in charge of the US has probably just added to that uncertainty!), but we do know that whatever happens, our global themes of consumption, innovation, ageing demographics, the rise of the emerging middle class and environmental solutions will continue to provide great investment opportunities for both our fund managers and you, our valued clients.
