2024 - a remarkable year for Bitcoin and gold

For several asset classes, 2024 was a remarkable year: Bitcoin rose to historical highs, gold recorded its best performance in the last 14 years, and the US dollar rose due to the evolution of the US economy, according to an analysis by visualcapitalist.com, which notes that the S&P 500 stock index had, in 2023 and 2024, the best two-year evolution in the last 25 years.

In contrast, bonds recorded poor performances due to relational concerns.

• Bitcoin Returns Over 120%, Gold 27%

With a return of 120.8%, the cryptocurrency Bitcoin more than quadrupled the return of gold and U.S. large-cap companies in 2024, fueled by broader investor adoption and the re-election of Donald Trump as U.S. president, according to the cited analysis, which is based on TradingView data.

It notes that retail and institutional investors alike have placed billions of dollars in Bitcoin spot ETFs following approval by U.S. regulators in early 2024. In just 11 months, the iShares Bitcoin Trust ETF has seen inflows of $50 billion.

Since 2015, Bitcoin has consistently outperformed major asset classes, with the exception of 2022 and 2018, according to the aforementioned source.

Gold, with a 27.2% return in 2024, had its best year since 2010, driven by central bank purchases, policy rate cuts and geopolitical instability. In particular, central banks in China, Turkey and India have been buying more gold in the past two years as an alternative to the US dollar. This reflects a broader trend among global central banks, where gold accounts for 11% of reserves, almost double the level in 2008.

When it comes to US stocks, large-cap companies investing in artificial intelligence (AI)-related technologies continued to drive the S&P 500 to multiple records last year. These companies returned 23.3% in 2024, while small-cap companies returned 10.1%.

The Dollar Index, which tracks the U.S. currency against other major currencies, returned 7.1%, followed by emerging market stocks, which returned just 4%. A stronger U.S. dollar typically underperforms emerging market stocks, as foreign currencies come under more pressure.

Last year, emerging market stocks underperformed U.S. stocks by the most in more than three decades.

Commodities returned 2.6% last year, while U.S. housing fell 1.1%, the source said. Crude oil returned 0.7%.

The worst-performing major asset class, long-dated U.S. Treasuries fell 11.7% and U.S. corporate bonds fell 2.6%. The yield on short-term Treasury securities fell by just 0.1%.

Looking ahead, bond investors fear a resurgence of inflation and a rising deficit under the Trump administration, in light of proposed tax cuts and the impact of high tariffs on the government budget, the cited analysis concludes.

• Bogdan Maioreanu, eToro: "Investors cautious at the beginning of 2025, but optimistic about the outlook for the whole year"

Looking at the first quarter of 2025, the event agenda seems to be standard, with the World Economic Forum and corporate financial reports, as in any other year, says Bogdan Maioreanu, analyst and market commentator at eToro, noting: "This year, however, investors' eyes are focused on January 20, with the inauguration of Donald Trump for a second term as the 47th President of the United States and the policy changes he will impose."

He explains: "Investors are eagerly watching the tariff decisions that Donald Trump could make once he gets to the Oval Office of the White House. And this is evident in the financial markets, with the S&P 500, Dow Jones and Nasdaq all essentially flat, with gains of less than 1% year-to-date. There is optimism among crypto-supporting investors that Trump could implement more friendly policies with less regulation that could benefit these assets.

Despite a tense start to the year, companies' profitability projections may bring confidence to financial markets, but their current valuations urge caution. That is the problem. The valuation of companies in the S&P 500, for example, has risen to an average of more than 23 times their future earnings, which is well above the historical average. The fourth-quarter 2024 financial reporting season, which JP Morgan traditionally unofficially opens in mid-January and Nvidia closes in the second half of February, will also clarify companies' expectations for 2025."

The US Federal Reserve (Fed), the European Central Bank (ECB) and other central banks will continue to cut interest rates in 2025, but may not do so in the first quarter of the year, says the eToro analyst, adding: "The market sees only one interest rate cut by the Fed this year, sometime in June, a normal effect of uncertainties about the measures the Trump administration will take and their impact on the economy. And this is despite Trump's statements that interest rates are too high, even though he has also criticized the still high inflation. This could create new tensions with Fed Chairman Jerome Powell, who resisted pressure to cut rates during Trump's first term. In the minutes of the last monetary policy meeting, the Fed expressed concerns about what the economic environment could look like this year due to the changes proposed by the incoming Trump administration."

In the latest eToro Retail Investor Beat survey, when asked what the biggest external risks to their portfolios were, global retail investors ranked a potential global recession, international conflict and inflation as their top three concerns. And Donald Trump's latest public statements are fueling these fears.

Romanian investors are also feeling the uncertainty, with 50% of them saying they will not add to their portfolios in the first quarter of this year, compared to 47% of investors surveyed who say they will invest more. However, 59% of global retail investors expect the bull market to continue throughout 2025. Romanian investors are even more optimistic, with 76% of those surveyed expecting this. When it comes to which stock markets will offer the best returns in 2025, 46% of Romanian investors are betting on the United States, 37% on Europe and 24% on the Chinese market.