Year-end review of the top ten global financial hotspots in 2024: Shift in monetary policy, Trump victory, stock market turbulence

According to Zhitong Finance APP, in 2024, the global financial market is experiencing an unprecedented upheaval. From the Bank of Japan's first interest rate hike in 17 years to the Federal Reserve initiating a new round of interest rate cuts, from the market frenzy triggered by Trump's election victory to the political turmoil in South Korea, from the global system paralysis caused by the CrowdStrike incident to the tech stock turbulence brought about by ASML's poor performance, and finally to Bitcoin breaking the $100,000 mark and A-shares hitting a new high for foreign capital inflow—this year, the financial market has witnessed a significant shift in monetary policy, profound impacts of geopolitical factors, the ups and downs of the tech industry, and a major restructuring of global asset allocation.

These events not only changed the landscape of the global financial market but also profoundly influenced the future direction of the world economy. They reflect the tortuous process of global economic recovery in the post-pandemic era and showcase the far-reaching impact of technological innovation and geopolitical competition on the financial market. In this grand market transformation, each significant event acts like an important chess piece, collectively constructing the grand picture of the global financial market in 2024.

Major Turning Point in Monetary Policy

With the changing global economic situation, the monetary policies of various central banks have begun to undergo significant turning points. In this process, the major turning point in monetary policy is undoubtedly one of the most eye-catching events in the financial market in 2024. From the Bank of Japan's interest rate hike to the Federal Reserve's interest rate cuts, the shift in policy is closely related to the flow of global capital.

Japan bids farewell to the era of negative interest rates, raising rates for the first time since 2007

In March 2024, Japan officially bid farewell to the era of negative interest rates, a shift primarily attributed to strong domestic wage growth, with large enterprises agreeing to a 5.28% wage increase and an average monthly salary increase of 5.1% for regular employees, marking a 33-year high, creating a virtuous cycle with rising inflation, indicating that Japan seems to have escaped from long-term economic stagnation and deflation. Additionally, the improvement in economic conditions, the urgent need for monetary policy normalization, and the stabilization of market expectations for the Bank of Japan's policy adjustments together constitute important driving forces for ending the negative interest rate policy. Although the yen did not appreciate as expected after the rate hike and instead hit a four-month low, this did not affect the foresight and rationality of the Bank of Japan's decision-making, marking an important step for Japan in adjusting its monetary policy.

This policy shift has had a profound impact on the global financial market. First, with the increase in Japanese interest rates, the long-standing arbitrage trades where investors borrowed low-interest yen to invest in high-yield assets began to unwind, triggering fluctuations in the global financial market. Second, as Japanese investors are the largest overseas holders of U.S. Treasury bonds, the rise in domestic interest rates in Japan may lead to a capital return, thereby putting pressure on the U.S. Treasury market, pushing up U.S. bond yields, and subsequently affecting the overall borrowing costs in the U.S. At the same time, this policy shift has also triggered turbulence in Asian stock markets, with the South Korean KOSPI index and the Hong Kong Hang Seng index experiencing significant declines, while the U.S. stock market's S&P 500 index and Dow Jones index also faced selling pressure, especially in sectors closely related to the Japanese market.

Looking ahead, as Japan's economy continues to recover and inflation levels stabilize, it is expected that the Bank of Japan will continue to cautiously adjust its monetary policy, gradually moving towards a more normal interest rate environment. This process may have far-reaching effects on the global financial market, including the unwinding of arbitrage trades, capital returning to the U.S. Treasury market leading to rising yields, and fluctuations in Asian stock markets and U.S. stock markets Especially in the U.S. stock market, technology stocks may face significant pressure. According to Société Générale analysis, the earnings expectations for U.S. technology stocks are declining, and the further unwinding of yen carry trades may trigger a new round of market volatility. In the bond market, Japanese government bond yields are expected to rise, which could lead to a general increase in global bond yields, having a profound impact on global capital markets.

The Federal Reserve initiates a new cycle of rate cuts for the first time in over four years

In contrast to the Bank of Japan's rate hike policy, the U.S. has taken a completely different direction. In September 2024, the Federal Reserve announced a 50 basis point rate cut, lowering the target range for the federal funds rate to 4.75%-5.00% for the first time in over four years. This decision was based on the continued decline of U.S. inflation towards the 2% target level and signs of weakness in the labor market. Data shows that the U.S. core PCE price index rose to 2.4% in November, while non-farm payroll growth has significantly slowed, and the unemployment rate slightly increased to 4.2%. These indicators collectively supported the Federal Reserve's decision to shift towards easing.

This policy shift immediately triggered a strong reaction in global financial markets. The three major U.S. stock indices surged collectively, with the Nasdaq index rising more than 3% in a single day, while the S&P 500 and Dow Jones Industrial Average increased by 2.5% and 2%, respectively. Technology and growth stocks performed particularly well, as these companies are more sensitive to interest rate levels. At the same time, the U.S. dollar index saw a significant decline, leading to a general strengthening of emerging market currencies. In the bond market, the yield on the U.S. 10-year Treasury bond fell sharply, boosting the global bond market.

Looking ahead to 2025, the market generally expects the Federal Reserve to continue its rate-cutting process, primarily based on the judgment that the U.S. economy may experience a mild recession in the second half of 2024. As the rate-cutting cycle progresses, it is expected to continue supporting the valuation of risk assets, especially technology and growth stocks, which may continue to benefit. Morgan Stanley predicts that during this rate-cutting cycle, the S&P 500 index is likely to break through the 5000-point mark. However, it is also necessary to be wary of the increasing risk of economic recession, which may lead to a decline in corporate earnings, potentially offsetting the support that a low-interest-rate environment provides to the stock market. Additionally, the Federal Reserve's policy shift may also prompt other major global central banks to follow suit with rate cuts, thereby initiating a new round of global monetary easing, injecting new liquidity dynamics into global capital markets.

Geopolitics and Market Volatility

Aside from changes in monetary policy, geopolitical turmoil in 2024 has also become a focal point for financial markets. From Trump's victory to political turmoil in South Korea, political factors continuously influence investor confidence and market volatility.

Trump's victory triggers market restructuring: U.S. stocks hit new highs, cryptocurrencies soar

In November 2024, Trump's victory in the U.S. presidential election immediately triggered a violent reaction in global financial markets. The three major U.S. stock indices reached historic highs, with the Dow Jones Industrial Average soaring over 1300 points in a single day, an increase of 3%; the Nasdaq rose over 400 points, an increase of 2.25%; and the S&P 500 index rose 120 points, an increase of over 2%. In this wave of "Trump trades," Tesla stood out, surging 39% since election day, with a market capitalization increase of over $300 billion As a typical "momentum stock," Tesla's upward trend is showing a snowball effect, with options market data indicating that the nominal trading value of Tesla options has reached $145 billion daily, far exceeding other individual stocks.

In the cryptocurrency sector, Trump's election victory has sparked a wave of excitement. Bitcoin has broken through the $80,000 mark, setting a new historical high, and the total market capitalization of the global cryptocurrency market has surpassed $3 trillion. Cryptocurrency-related stocks have also surged significantly, with Coinbase up 30%, MicroStrategy up 13%, and Robinhood soaring 20%. This surge is primarily driven by Trump's promise to make the U.S. the "global cryptocurrency capital" and his plan to establish a Bitcoin reserve.

Looking ahead, the market generally expects the Trump administration to introduce a series of favorable policies, including tax cuts, deregulation, and support for technological innovation. Top brokerages like Citigroup and Goldman Sachs have quickly released research reports emphasizing that Trump's policies could once again drive the market, especially the performance of U.S. stocks. However, potential risks must also be heeded. First, if Trump implements high tariff policies, it could harm large multinational companies, while cracking down on immigration could raise labor costs. Second, excessive market optimism could lead to asset bubbles, particularly in the cryptocurrency and tech stock sectors. Finally, Trump's trade protectionist policies could trigger global economic uncertainty, thereby affecting market stability.

Political Turmoil in South Korea

In addition to the U.S., South Korea's political landscape also experienced significant turbulence in December 2024, triggering a sharp reaction in the capital markets. Less than six hours after President Yoon Suk-yeol announced a state of emergency, he hastily rescinded it, leading to a severe political crisis. Subsequently, the South Korean National Assembly overwhelmingly passed a second impeachment motion against Yoon with 204 votes in favor, making him the third president to be impeached by the National Assembly after Roh Moo-hyun and Park Geun-hye. This political turmoil immediately triggered a violent reaction in the global capital markets, with the Korea Composite Stock Price Index opening down 2.3%, and foreign investors net sold approximately 24 trillion won worth of stocks within two weeks, while the won to dollar exchange rate briefly fell below 1452, marking the lowest level since the global financial crisis.

This political crisis has had a ripple effect on the global capital markets. South Korean companies listed in the U.S. suffered heavy losses, with the American Depositary Receipts of e-commerce giant Coupang dropping 9.8% at one point, and POSCO's American Depositary Receipts also falling 4.4%. To stabilize the market, the South Korean government quickly took action, with the Bank of Korea promising unlimited liquidity support and conducting a 12 trillion won reverse repurchase operation in a single day. Meanwhile, the Financial Services Commission prepared a 10 trillion won stock market stabilization fund, ready to inject into the market at any time.

Looking ahead, the uncertainty in South Korea's political situation may continue to ferment. The Constitutional Court will make a ruling on the impeachment case within 60 days, and if the impeachment is successful, South Korea will hold a presidential election within 60 days. This political uncertainty may continue to affect investor confidence, leading to sustained capital outflows from the South Korean market. Analysts expect that until the political situation stabilizes, South Korean assets may remain under pressure, and investors may require a higher risk premium to invest in the won and South Korean stock market In addition, the Bank of Korea has lowered its economic growth forecast for 2024 from 2.4% to 2.2%, and for 2025 from 2.1% to 1.9%. This uncertainty in the economic outlook may further exacerbate market volatility.

Turbulence and Innovation in the Technology Sector

CrowdStrike Software Update Causes Global IT System Outage

In 2024, the turbulence in the technology sector is not solely driven by market fluctuations; various technical incidents have also intensified the uncertainty in the industry. On July 19, 2024, a software update from CrowdStrike triggered a large-scale system crash globally. This incident caused approximately 8.5 million Windows devices worldwide to experience blue screen crashes, affecting industries such as transportation, finance, healthcare, and retail in over 20 countries. The direct cause of the incident was a configuration error during the update of CrowdStrike's Falcon Sensor product, which created compatibility issues with the Windows system, leading to repeated system crashes. This failure not only affected ordinary terminal devices but also impacted numerous servers and cloud nodes, resulting in interruptions to several Microsoft and AWS cloud services.

This event had a severe impact on global financial markets. Employees at several financial institutions, including JP Morgan, Nomura Holdings, and Bank of America, were unable to log into their systems, and some hedge funds faced trading interruptions. The regulatory news release platform of the London Stock Exchange was also affected, preventing timely publication of price-sensitive information. In the capital markets, CrowdStrike's stock price plummeted over 13%, hitting a six-month low, and multiple investment banks downgraded their target prices. Microsoft's stock price also fell 2.5% in pre-market trading.

After the incident, CrowdStrike quickly took remedial measures, including retracting the problematic update, providing repair tools, and offering 24x7 service support to affected customers. Although the company's rapid response earned some recognition from clients, the incident still led to approximately $60 million in transactions being delayed in its sales pipeline. Looking ahead, this event may prompt profound reflection and transformation across the entire cybersecurity industry. Multiple government agencies and security experts have called for Microsoft to redesign the Windows system to ensure that while security tool functions are maintained, the system can automatically recover in the event of issues. This trend of transformation may lead to a reshuffling of the cybersecurity industry landscape, affecting the valuations and market performance of related tech stocks, including CrowdStrike and Microsoft. At the same time, it may also prompt institutional investors to reassess the investment risks of cybersecurity companies, having a far-reaching impact on the capital flow within the entire technology sector.

Signals of Cooling AI Frenzy: ASML's Earnings Shock Triggers Global Tech Stock Turbulence

After a surge in the semiconductor sector in the first half of the year, there is some market pressure as the year-end approaches. On October 16, 2024, global lithography giant ASML unexpectedly released its third-quarter financial report early due to "technical issues," triggering severe turbulence in the global semiconductor sector. The financial report revealed that ASML's third-quarter order volume was only €2.6 billion, far below the market expectation of €5.4 billion, while the company lowered its 2025 sales target to a range of €30-35 billion, significantly down from the previous expectation of €30-40 billion This negative news caused ASML's stock price to plummet by 16%, marking the largest single-day decline since 1998, with a market value evaporating by over $50 billion in a single day.

This event triggered a chain reaction in the global capital markets. Affected by ASML's poor performance, the global chip stocks saw a market value loss of over $420 billion, and the Philadelphia Semiconductor Index recorded its largest single-day decline of 5.3% since September. In the U.S. stock market, NVIDIA fell by over 4.69%, AMD dropped 5.22%, and Intel decreased by 3.33%, putting overall pressure on tech stocks. The Asian market also suffered, with Tokyo Electron once plunging 10% and TSMC falling by 3.3%.

Looking ahead, although ASML CEO Peter Wennink emphasized that there is still strong growth potential in the field of artificial intelligence, the recovery speed in other market areas is slower than expected. Citigroup analyst Atif Malik pointed out that while the slowdown in non-AI application growth was anticipated, the downward adjustment exceeded market expectations. Some investors believe this may be a unique issue for ASML rather than a systemic risk for the entire industry. With the advancement of China's economic stimulus measures, chip demand recovery may be driven. However, this incident also exposed the structural challenges facing the semiconductor industry, which is expected to prompt investors to reassess tech stocks, especially the valuation levels of AI-related companies, potentially leading the market into a more rational valuation phase.

Artificial Intelligence and Robotics Innovation

In 2024, the fields of artificial intelligence and robotics technology witnessed significant breakthroughs, with Tesla successfully achieving mass production of its humanoid robot, Optimus, marking the transition of this technology from science fiction to reality. Tesla expects to produce at least 1,000 Optimus robots by the end of 2025 and plans to achieve large-scale production by 2026. This robot not only possesses flexible hand movements and autonomous operation capabilities but is also widely used in Tesla's manufacturing processes, enhancing production efficiency. Meanwhile, the startup Figure AI is also accelerating the commercialization of its humanoid robots, which have already begun to be deployed in large manufacturing companies like BMW. These advancements indicate that humanoid robot technology is rapidly maturing and gradually entering practical application stages.

At the same time, Apple is not to be outdone, launching a new AI device, Apple Intelligence, aimed at deeply integrating artificial intelligence into its products. The release of the new iPhone 16 marks Apple's official entry into the generative AI field. Although the market reaction has been tepid, Apple's efforts demonstrate its emphasis on future technological trends. By embedding AI functionalities into its phones, Apple hopes to enhance user experience and strengthen market competitiveness.

These technological breakthroughs have had a profound impact on the global capital markets. In the U.S. stock market, tech giants like Tesla and Apple have seen significant stock price increases, with investors expressing confidence in the prospects of the AI and robotics sectors. Tesla's market value increased by hundreds of billions of dollars in a short period, while Apple's AI strategy has also attracted considerable attention, being viewed as an important driver of future growth despite facing fierce competition.

Looking ahead to 2025, as artificial intelligence and robotics technology continue to advance, these fields are expected to encounter greater development opportunities. Analysts generally believe that the humanoid robot market will expand rapidly in the coming years, potentially becoming a multi-trillion-dollar industry Tesla and other technology companies' continuous innovation will drive the improvement of industry standards, while also potentially triggering a new wave of investment. However, investors should also pay attention to the uncertainties of technological development and potential regulatory challenges, as these factors may affect the market's valuation of related companies.

Global Asset Allocation Restructuring

Changes in monetary policy and the results of the U.S. presidential election, particularly the political backdrop of Trump's victory, have become important driving factors for market volatility. With adjustments in monetary policy and the expected impact of Trump's governance, traditional safe-haven assets such as gold and digital currency Bitcoin, as well as the Japanese yen, have experienced significant fluctuations. These fluctuations are not only a direct response to market sentiment but also a reflection of the restructuring of the global financial system. Investors, when faced with these fluctuations, must reassess the profound impact of global political and economic changes on asset prices.

Gold, Bitcoin, and other safe-haven assets significantly appreciate

In 2024, against the backdrop of rising global economic uncertainty, gold and Bitcoin, as major safe-haven assets, performed strongly. The price of gold broke through $2,700 per ounce, setting a new historical high, with an annual increase of 24%. Bitcoin performed even more impressively, with its price soaring from $40,000 at the beginning of the year to over $100,000, achieving an annual increase of over 130%, and its market value exceeding $2 trillion, surpassing silver to become the seventh-largest asset globally.

In 2024, gold saw a strong rise, with prices continuously reaching new highs, primarily driven by escalating global uncertainty, changes in U.S. monetary policy, and the ongoing accumulation of gold by central banks. First, the rise in geopolitical risks is a key factor driving the demand for gold. The global tensions, including the ongoing conflict in Ukraine, instability in the Middle East, and fluctuations in U.S.-China relations, have led investors to shift their funds toward safe-haven assets, with gold being the preferred choice.

The slowdown of the U.S. economy and the Federal Reserve's monetary policy adjustments are also important reasons for the rise in gold prices. Although the U.S. dollar remained strong in the first half of 2024, the market generally expects the Federal Reserve to enter a rate-cutting cycle, reducing investors' interest in dollar-denominated assets, which indirectly pushed up gold prices. Additionally, gold's anti-inflation characteristics make it a favored safe haven under global inflationary pressures, especially in a context where inflation, although easing, remains above historical averages, gold still possesses strong value retention capabilities.

Moreover, the increase in gold reserves by central banks is also a significant factor driving up gold prices. Several economies, particularly countries like China and Russia, continue to increase their gold reserves as part of diversifying their foreign exchange reserves. This rise in central bank demand directly boosts the market price of gold.

In 2024, Bitcoin experienced significant gains, breaking through several key technical levels, with this surge primarily driven by several contributing factors. First, Trump's victory and his supportive policies towards cryptocurrencies injected new momentum into the market. During his campaign, Trump promised to include Bitcoin in the U.S. strategic reserves and provide more regulatory support for cryptocurrencies, which stimulated market demand for Bitcoin. Investors' recognition of Bitcoin as digital gold further strengthened, believing it has safe-haven and value retention functions in uncertain economic environments Secondly, as global inflationary pressures gradually ease, market confidence in traditional currencies has been shaken, leading many investors to seek non-traditional assets as hedging tools. Bitcoin, as a decentralized digital asset, has become an ideal choice. Its limited supply and decentralized characteristics make it more attractive to many investors, especially in the context of persistent long-term inflation expectations.

In addition, the launch of Bitcoin ETFs has also supported its price increase. The success of Bitcoin ETFs has attracted a large number of institutional investors into the market, and this influx of institutional funds has accelerated the rise in Bitcoin prices. By 2024, the asset size of Bitcoin ETFs reached 82% of that of the U.S. gold ETFs within just ten months of their launch, indicating a growing market confidence in Bitcoin.

Looking ahead, the market generally believes that safe-haven assets still have room for appreciation. Huatai Securities analysis suggests that geopolitical conflicts and debt issues in developed countries will continue to support the medium- to long-term allocation value of gold. Standard Chartered Bank predicts that, supported by Trump’s policies, Bitcoin prices are expected to reach $200,000 by the end of 2025. However, caution is warranted; if risk appetite improves next year, major developed economies may reduce their gold holdings in favor of Bitcoin, which could lead to a divergence in the performance of these two types of safe-haven assets. This shift in asset allocation may trigger a new round of market volatility, requiring investors to adjust their investment strategies in response to market changes.

A-shares witness history, foreign capital goes on a buying spree

At the end of September, stimulated by a series of significant favorable policies in China, A-shares surged, injecting strong confidence into the market. With the restoration of market confidence, foreign capital inflow also significantly increased, especially in some key industries, where foreign funds accelerated their entry. In a single week, foreign capital inflow into the Chinese stock market reached as high as $9 billion, setting a new record and further driving up A-shares.

Looking ahead, foreign institutions generally hold an optimistic view on Chinese assets. UBS, in its latest report, predicts that benefiting from domestic policy support, low base effects, and the return of retail funds, the Chinese stock market is expected to achieve considerable returns by 2025. Goldman Sachs forecasts that the MSCI China Index and the CSI 300 Index will rise by 15% and 13%, respectively, in 2025. This shift in capital flow may lead to adjustments in the global asset pricing system, particularly in sectors such as technology, consumer goods, and advanced manufacturing, where the valuation advantages of Chinese assets may further manifest, thereby affecting the valuation levels of related sectors in the U.S. stock market.

Yen carry trade unwound, triggering a sharp decline in the stock market

In early August 2024, as expectations for narrowing U.S.-Japan interest rate differentials heated up, large-scale unwinding of yen carry trades occurred, causing severe fluctuations in global financial markets. The yen appreciated rapidly against the dollar, rising from 161.96 to below the 145 mark, reaching a nearly two-year high. This sudden appreciation of the funding currency severely damaged carry trade strategies, forcing many investors to close their positions. In just three weeks, the global stock market lost approximately $6.4 trillion in market value, with the Nikkei 225 index experiencing its largest decline since 1987.

This storm triggered a chain reaction in global capital markets. In the U.S. stock market, both the S&P 500 Index and the Nasdaq Index saw significant declines, with technology stocks being the hardest hit Due to investors needing to sell high-yield assets to cover their yen positions, market liquidity has sharply contracted. At the same time, the yen's safe-haven properties have further pushed up its exchange rate, creating a vicious cycle. High-yield currencies like the Australian dollar have been severely impacted, and emerging market assets are also facing selling pressure.

In the December interest rate meeting, looking ahead, the Bank of Japan released dovish signals, while the Federal Reserve issued strong hawkish signals. Against this backdrop, it may be a bit difficult for the yen to return to the strong rebound seen in August, and it may also be temporarily challenging to stir up arbitrage trading in the market again