Last year positively surprised many investors with great profits, especially when it came to stocks, gold and cryptocurrencies. However, the start of 2025 has been accompanied by uncertainty and investor caution. To help you plan the best investment strategy for the new year, let’s briefly recap 2024 and take a look at the current situation and analyst forecasts.
The year 2024 was more than successful
The year 2024 was an extremely prosperous period for stock markets. Favourable macroeconomic conditions, a rapidly recovering post-pandemic economy and strong demand for technology products contributed to growth. Investors benefited from a combination of falling interest rates and strong stimulus from governments around the world. Technology stocks posted the biggest gains, driven by artificial intelligence, quantum computers and advances in renewable energy.
The MSCI World Global Index rose more than 18%, beating analysts’ expectations. US stock markets posted the biggest gains, but European ones were not far behind. Local exchanges also made gains. Analysts highlighted the Prague Stock Exchange, for example, with the PX index gaining 25% over the past year and the PX-TR dividend index gaining 34%.
The year 2024 also brought an extraordinary rise in the price of gold, which rose by more than 27% and even broke its all-time record in October.
The past year has been particularly important for cryptocurrencies. The main price catalysts were the approval of the Bitcoin ETF and Donald Trump’s victory in the US presidential election. Bitcoin saw an annual increase of more than 120%, surpassing its all-time highs many times over and reaching prices as high as $108,000. Other cryptocurrencies have fared similarly, with Ethereum, for example, posting an annual gain of almost 70%.
A challenging start to 2025
The start of 2025 has not been so positive and has completely wiped out any Christmas gains from the “Santa Claus Rally”. On Monday, stocks ended 2024 with a slight decline as many investors decided to lock in their gains. For example, the S&P 500 index ended the year with four consecutive days of losses, the first time that has happened since 1966. It posted a stunning 23% gain for 2024, but fell 2.5% in December.
The results remained mixed even after trading resumed on Thursday, January 2, 2025. Investors took profits mainly from some big profitable companies like Apple and Tesla. The Dow Jones and S&P 500 indexes ended the day down more than 1%. The Nasdaq Composite index fell more than 2%.
One of the main reasons for the initial decline was a combination of economic and geopolitical factors. Following the US presidential election in November, a huge rally was unleashed on the stock markets, strongly motivated by optimistic investor sentiment. This rally continued into December, with investors blinded by profits often failing to take into account other lingering risks in the market. However, as the New Year begins, many are coming back to reality and realizing the overvaluation of the stock market.
Prospects for 2025
Analysts expect stock growth in 2025 to be less dynamic than in previous years, as markets are already full of uncertainty at the start of the year. High energy prices, particularly oil and gas, along with concerns about slowing economic growth in key economies such as China and the Eurozone, are contributing to market volatility. In addition, high inflation and questions about where central banks will move interest rates are contributing to investor nervousness. The US Federal Reserve (Fed) is likely to cut rates much more slowly than expected, which may hurt riskier assets.
As early as this month, Donald Trump is expected to take office as US President and markets are anxiously awaiting what action he will take. His references to raising tariffs and strained relations with China are putting further pressure on the global economy. Added to this, conflicts in Eastern Europe and tensions in the Middle East are affecting energy prices. Increased geopolitical uncertainty therefore remains a major risk factor.
The technology sector, which has been the engine of growth in recent years, is already experiencing a partial correction. The valuations of many companies are under pressure due to fears that demand for their products and services could fall. At the same time, regulatory pressures are intensifying, particularly in the artificial intelligence and digital market, increasing uncertainty about developments in the sector.
