Financial Review 2024: End of the fight against inflation? Are central banks finally achieving their objectives?
2024 was marked by a number of events that had a direct impact on the global economy and financial markets.
The SNB (Swiss National Bank), perfect or indecisive reactions?
The first event to be mentioned is in our own country, Switzerland.
Throughout the year, we have had surprise rate cuts from SNB President Jordan.
On 3 occasions, the Swiss National Bank decided to announce rates that investors had not expected, in March, June and December, when rates were announced 0.25% lower than forecast.
This risk-taking to surprise the markets with unexpected rate cuts can be explained by the SNB’s total control of inflation. We can see that, despite the unexpected rate cuts, Swiss monthly inflation has been falling steadily in 3 of the 4 quarters.
Europe is doing well, but not France
Like her American and Swiss friends, the President of the European Central Bank, Ms Lagarde, has begun to relax her monetary policy by cutting rates from June onwards.
Although less confident than Mr Jordan about controlling inflation, the ECB has nevertheless cut rates three times this year, from 4.5% to 3.15%, while keeping monthly inflation between 2.9% (January 2024) and 2.2% (December 2024).
Another issue in 2024 that had a greater impact on Europe, and particularly France, was the dissolution of the National Assembly announced on 9 June 2024 by French President Emmanuel Macron.
The President took the decision to dissolve the National Assembly, partly following the poor result of the presidential party in the European elections and the rise of the Rassemblement National.
The main consequences of this event in France are as follows: the halting of current bills, the organisation of new legislative elections and, above all, the appointment of a new prime minister. Following Gabriel Attal’s resignation in September, François Bayrou was appointed to the post on 13 December.
Another consequence of the announcement of the dissolution of the National Assembly is the poor health of the French financial markets.
The CAC, which has struggled to perform since March 2024, saw its share price fall by almost 11.5% at its lowest point following the announcement, from 7,903 to 7,030.
Geopolitical conflicts as intense as ever
The year 2024 has also been shaken by the various geopolitical conflicts in the Middle East and the Russia/Ukraine war, which have had a considerable impact on the health of the global economy.
An unexpected comeback?
To conclude these various points, we must announce one of the most significant events of 2024: the election of Donald Trump on 5 November 2024 as President of the United States for the second time in three terms.
Even though the future American president will not take office until January 2025, no market has escaped this event.
One of the major promises of the future President is fiscal stimulus, in the form of tax cuts and customs duties, to support the health of local businesses, which will theoretically lead to favourable growth for the equity market.
The US SP500 index gained almost 5.3% in the week following the announcement, and has continued its year-on-year rise, topping the USD 6,000 mark.
Having not yet taken office, Donald Trump wasted no time in appointing his loyal supporter, Elon Musk, to head the ‘new US Department of Government Efficiency’.
One market in particular took advantage of this announcement to outperform, and that was the cryptocurrency market.
Knowing billionaire Elon Musk’s attraction to the asset, Trump’s announcement to give Musk a title will surely lead to better legislation and a policy more conducive to the development of crypto-currencies. The most famous cryptocurrency, bitcoin, has risen by more than 60% at its peak, even reaching the long-awaited USD 100,000 mark, since Trump took office, and other cryptocurrencies have taken advantage of this to explode (+70% for Ethereum, +200% for DogeCoin, without being able to list all of them, as it would take me several hundred hours).
And what about currencies?
Since 1 January 2024, the EUR/CHF currency pair has given us some (nice?) surprises. It is almost 2 years since the parity was last touched, which is an historic achievement.
While most forecasts were for a return to 1:1, the EUR/CHF has been unpredictable and unable to live up to expectations. At best, we have gained +6.92% since January 1, peaking at 0.9930 in 2024. The currency pair has not fallen completely either, depreciating by a maximum of -0.81%, reaching an all-time low of 0.9201. From a technical point of view, one area in particular catches my eye. This is the zone between 0.9480 and 0.9580. Over 2024, this zone acted as support and resistance, being touched and rejected a total of five times.
Over the year 2024, we reached, firstly, Monday 5 August, the day on which the world’s financial markets fell sharply (-3% on the S&P 500, -12.65% on the Nikkei), and which came to be known as ‘Black Monday’.
Secondly, a few months later, on Friday 22 November, we hit the current all-time low of 0.9201.
Since the start of October, the EUR/CHF market has been trading in a range between 0.9440 and 0.9270, and has yet to decide whether to continue in a downtrend or retrace upwards.
What does the future hold for 2025?
The year 2025 is just around the corner, and here are just some of the issues that could have a major impact on finance, and on the forex market in particular.
Trump
Trump’s return to centre stage on 20 January is another sign of a year that is likely to be full of twists and turns. Between the introduction of tariffs, his desire to put the United States back on the ‘straight and narrow’ and his outlandish comments (such as when he called for Canada to become the 51st US state), finance as a whole (stock market indices, foreign exchange, equities, bonds, commodities, crypto) will be in turmoil. We expect a great deal of volatility.
And in Europe?
In Switzerland
Swiss inflation is edging closer to 0.5%, while the SNB is constantly trying to surprise the market by cutting its key rates a little further than forecast. The question on everyone’s lips is whether we will see negative interest rates again in 2025 to counter the strong Swiss currency and low inflation. One thing is certain: the new Chairman of the SNB (Martin Schlegel) is not ruling out a return to negative interest rates. To be continued…
Here is the annual inflation rate for the eurozone (green), the United States (yellow) and Switzerland (blue). As you can see, Switzerland has never been overly affected by this figure, thanks to its currency, which prevents inflation from being imported into the country.
In Germany
Europe is at an important turning point, with political tensions in France and in Europe’s leading power. Germany has experienced two years of recession, and the automotive market is struggling. Volkswagen is planning to close plants in Germany. This shows the extent to which one of the key sectors of the German economy is suffering. Then there are the early elections in February. German Chancellor Olaf Scholz lost a vote of confidence in the Bundestag in December 2024. The centre-right opponent is likely to be elected at a time he cites as one of the greatest economic crises in post-war history…
