The best-performing major assets in 2024: Bitcoin, gold, US stocks, and Chinese long-term bonds

Core Viewpoints

Since 2024, the "exceptionalism" of U.S. assets, the strengthening of thematic trends, and the frequent rotation of global funds are the three core factors driving the prices of major asset classes. In an uncertain environment, certainty and growth have become scarce assets. In terms of asset performance, the main line of the market in 2024 continues to be "seeking certainty." Macroeconomic factors such as the Federal Reserve's interest rate cuts, the suspense of the U.S. elections, and the policy game in China are gradually materializing, requiring higher precision and flexibility in investment operations. At the major asset level, the leading assets in 2024 include Bitcoin, gold, U.S. stocks, and Chinese long-term bonds, while the lagging assets include domestic commodities, the euro, and crude oil. From the perspective of industries and individual stocks, the leading assets reflect long-term trends such as the AI technology industry chain, China's emotional consumption chain, and safe-haven assets in an uncertain environment.

Main Text

Year-End Review of Major Assets

As 2024 comes to a close, we conduct a year-end review of the performance of various assets. In an environment of rapid global fund rotation and international geopolitical turmoil, certainty and growth have become scarce assets, manifested in strong gold and record-high U.S. AI stocks, breaking traditional valuation frameworks. From the perspective of institutional behavior, market pricing power has changed hands several times, highlighting the differences in investors' flexibility and allocation capabilities, with passive and flexible funds being favored. Looking back over the past year, we find that the performance of assets embodies profound thematic trends of the era, as the financial market witnesses miracles while also presenting interesting phenomena.

First, from a macro perspective, the global economy is undergoing a profound transformation, with distinct misalignment characteristics.

The U.S. economy shows resilience, with increased policy uncertainty following the elections, focusing on the rebalancing of economic growth and inflation.

The Chinese economy exhibits low inflation characteristics, with steady growth policies reducing tail risks.

Japan shows signs of re-inflation, with the Bank of Japan going against the global trend of interest rate cuts, amid increasing political turmoil.

Europe faces a competitiveness crisis, with constraints on economic recovery resilience.

It is worth mentioning that Spain has become the best-performing economy among developed countries, actively promoting structural reforms to achieve long-term economic development. The Economist compiled data on five economic and financial indicators for 37 major developed countries in 2024, including GDP, stock market performance, core inflation rate, unemployment rate, and government deficit. Based on the performance of each economy, Spain ranks first, with its economic growth and employment growth exceeding that of the United States. **In terms of industrial structure, it has shifted from traditional manufacturing to emphasizing service sector development, driving growth through tourism. Diplomatically, it maintains an open policy towards immigration and actively engages in attracting investment. Therefore, the developed tourism industry and the growth of immigrant employment have a positive impact on local housing prices, and investment and production also support internal economic growth **

In terms of asset performance, the main theme of the market in 2024 continues to be "seeking certainty." Macro factors such as the Federal Reserve's interest rate cuts, the U.S. elections, and the suspense of China's policy game are gradually materializing, requiring higher precision and flexibility in investment operations. The core logic behind the global asset rotation in 2024 is:

1. The "exceptionalism" of U.S. assets: In a high-interest-rate environment, the U.S. fundamentals remain resilient, and U.S. stocks have maintained a leading position in the past two years;

2. Strengthening of thematic trends: The global election year combined with frequent geopolitical disturbances has amplified the impact of the era's background on asset prices, with gold performing remarkably, while the AI theme, after more than a year of "racing," begins to develop in depth, leading to the emergence of bull stocks in related industrial chains.

3. Frequent global capital rotation: The valuation gap between different assets is widening, with global capital frequently rotating and switching between high and low, whether between countries (Japan/China) or styles (large/small-cap U.S. stocks, domestic growth/dividend).

In terms of major asset classes, the leading assets in 2024 include:

1) Bitcoin: Mostly a risk-on asset, primarily priced based on its de-dollarization attributes + regulatory relaxation after Trump's administration + strict supply constraints, with higher acceptance of cryptocurrencies in developed countries like the U.S.;

2) Gold: Mainly a risk-off asset, driven by international turmoil + the U.S. interest rate cut cycle + concerns over the dollar monetary system due to persistent debt issues in developed countries + central banks in emerging markets buying gold, leading to record high gold prices;

3) U.S. stocks: In a high-interest-rate environment, U.S. fundamentals remain resilient, and U.S. stocks have also become the leading asset in the past two years, driven by corporate profit growth from the AI technology revolution + the dual drive of a soft landing interest rate cut wave, experiencing brief adjustments during crowded phases;

4) China's long-term bonds: Weak price signals + a downward cycle in real estate + loose monetary policy + significant institutional allocation pressure, leading to a continuous decline in domestic interest rates, with duration strategies achieving high capital gains.

Assets that underperformed throughout the year include:

1) Domestic commodities: The real estate market continues to cool, with ongoing supply-demand contradictions, leading to more realistic trading in the commodity market, with noticeable pullbacks in domestic black commodities;

2) Euro: The recovery pace of the European fundamentals is significantly weaker than that of the U.S., with fiscal tightening in Germany and other countries posing tail risks, leading to a weaker euro under the interest rate differential logic.

3) Crude oil: Demand is constrained by the high-interest-rate environment, lacking strong drivers, while the supply side faces potential production increase pressures from OPEC and the U.S., combined with Trump's trading, making it a weaker variety.

From the industry and individual stock perspective, leading assets contain changes in long-term trends:

1) AI technology industry chain: In the second year after the launch of ChatGPT, trading has gradually returned to rationality from the initial frenzy, but its popularity is far exceeding other historical technological revolutions. Large technology companies with platform advantages and companies in specific vertical fields with barriers still have significant advantages. The AI technology revolution has triggered an "arms race" among companies, with demand for computing power growing exponentially. Hardware manufacturers like Nvidia, which benefit from "selling shovels," have seen a significant increase, with a rise of 179% so far in 2024. Additionally, AI hardware is spreading to upstream infrastructure such as electricity and downstream software, with infrastructure service provider Vistra Power Company rising over 270% year-to-date. The US Mag7 has recorded a 70% increase year-to-date, leading the US stock market, making long positions in US technology stocks the most sought-after and crowded trading theme in 2024. Domestic reflections include Cambrian (with an increase of over 380% recently) and the recent AI application "Doubao" concept.

2) China's emotional consumption chain: In an environment where consumer sentiment is declining, market spaces with advantages and barriers in emotional consumption, self-indulgent consumption, and fan economy are growing strongly. Although traditional consumer demand continues to be sluggish, self-indulgent consumption represented by the "millet economy" is developing rapidly, with "millet products" based on two-dimensional IP generating high added value and rapidly growing market space. Among them, Pop Mart, as a leading company in the advantageous industry, has seen its revenue in the third quarter increase by 120% to 125% year-on-year in 2023, and its performance has exceeded market expectations for several consecutive quarters, with its stock price rising over 300% for the year.

3) Safe-haven assets in an uncertain environment: The main theme of the market over the past two years has been to seek certainty, with high-dividend assets such as precious metals and bank stocks becoming dominant assets under declining interest rates and low-risk preferences, seeking performance certainty. For the whole year, the banking sector has risen over 40%, outperforming the CSI 300 by nearly 20 percentage points, ranking among the top in various industries. On one hand, this may be due to the superior risk-return characteristics of the banking sector, which has attracted low-risk preference funds such as insurance capital; on the other hand, the banking operations are relatively stable, and through provisioning adjustments, they can smooth performance, achieving a 10% ROE and positive profit growth, becoming a tool for allocating safe-haven funds in the absence of a market theme.

Article authors: Zhang Jiqiang, He Yingwen from Huatai Fixed Income, source: [Huatai Securities Fixed Income Research](https://mp.weixin.qq.com/s?__biz=Mzg2Mjg1NTg3NA==&mid=2247501996&idx=1&sn=6489e58376395a8437720a6580ff8908&chksm=cf9ac9e29bdae80e0eb50639f202bdbd07cc300cfd08c891631cecd86d03ca1b2854e9a4f245&mpshare=1&scene=23&srcid=1230wgVDZAD33aYyU iIPOuNl&sharer_shareinfo=8fcada39ea389f6d799f4ba97a1ab3e8&sharer_shareinfo_first=8fcada39ea389f6d799f4ba97a1ab3e8#rd), Original Title: "【Huatai Asset Allocation】Weekly Review: Year-End Review of Major Asset Classes"

Zhang Jiqiang S0570518110002 Researcher

He Yingwen S0570522090002 Researcher