The MSCI World Index ended the year with a 17% gain. While most major markets registered positive returns, U.S. stocks were among the strongest performers. The S&P 500 Index surged 25% due to strong earnings and optimism around the prospects for artificial intelligence, and its implications across industries.
Japanese stocks also rose sharply with the Nikkei 225 climbing more than 18%, helped by a weaker yen, corporate governance reforms, and signs of economic recovery.
While European markets posted positive returns in 2024, gains were tempered by political uncertainty surrounding important national elections, persistent fiscal concerns in several member states, and anxieties related to potential trade tariffs.
Chinese equities experienced a volatile year in 2024. Despite significant government interventions through monetary and fiscal policy, the market was weighed down by weaker-than-expected macroeconomic data and a slowdown in consumer spending.
More broadly, emerging markets recorded a mixed performance. While several countries benefited from rising commodity prices and improved domestic demand, others faced headwinds from currency fluctuations and political uncertainties.
Globally, small cap stocks tended to underperform their large cap peers, particularly in markets with strong technology companies such as the U.S. and Europe. This partially reflected a preference for established companies with strong balance sheets in an environment of economic uncertainty. On a sector basis, technology, financial, and consumer discretionary stocks led market performance, while materials, energy, and healthcare lagged.
After two years of robust equity market returns, particularly in the U.S., expectations for 2025 lean towards more modest gains. Valuations in some segments appear elevated, and markets remain highly concentrated due to the exceptional performance of a small number of growth stocks in the U.S. Modest economic growth and potential trade headwinds could present challenges in the year ahead, requiring a disciplined approach to navigating an evolving market environment.
Throughout 2024, ADIA’s Equities Department (EQD) maintained its focus on markets offering robust growth potential and attractive alpha generation prospects.
Within its fundamental portfolio, EQD increased allocations to dynamic strategies with increased leverage and turnover characteristics. The Department also continued to expand its portfolio of systematic managers, while increasing allocations to alpha strategies with high risk-adjusted returns that are designed to capitalise on specific market inefficiencies. In addition, EQD diversified its active equity exposure by progressively scaling up investments in market-neutral and absolute return strategies.
By broadening its access to idiosyncratic alpha strategies, the Department aims to generate consistent returns with limited correlations to equity markets.
