2 weeks Ago By Daniel Lo Surdo, Miriam Steffens
The Australian sharemarket is set to open the new trading year lower, with futures suggesting declines in early trading on Thursday after Wall Street fell on New Year’s Eve. ASX futures were down 77 points, or 0.9 per cent, at 8148 on Tuesday (December 31), the last available price.
Markets were closed for the New Year’s Day holiday on Wednesday. The Australian dollar traded at 61.91 US cents.
The New York Stock Exchange finished the end of year on a sober note, which sent ASX futures lower. Credit: Bloomberg Wall Street set the tone for what should be a subdued start to 2025, finishing 2024 on a downer as the S&P 500 and the Nasdaq 100 dropped for a fourth consecutive session in a year-end pullback that has shaved more than $1US trillion from large-cap market values. Still, losses remain just a blip in an advance that has lifted the S&P 500 more than 50 per cent since the start of 2023, the best two-year gain since the late 1990s.
The US benchmark surged 23 per cent in 2024, stoked mostly by the hype around artificial intelligence breakthroughs. But gains slowed in the final quarter of the year, as the pace of the rally raised concerns and investors grew jittery about factors such as President-elect Donald Trump’s protectionist policies and the possibility of fewer interest rate cuts from the Federal Reserve. The S&P 500 fell 2.
5 per cent in December, marking its weakest return since April. “November and early December were very concentrated at the top of the market so it didn’t take much once those names took at breather for market to lose momentum,” wrote Walter Todd, president and chief investment officer at Greenwood Capital Associates in the US. “Valuations are elevated, there are a lot of unknowns regarding new administration and the move higher in rates have been problematic for stocks.
” US President Donald Trump and Chinese President Xi Jinping in 2019. Australian market watchers are concerned what impact the two largest economies will have on the local bourse. Credit: AP Still, the 2024 gains in the US left the Australian sharemarket in the dust, and the local market finished the year a tad worse than it did in 2023 amid exacerbating cost-of-living pressures and rising interest rates.
The losses over the last two days of the year trimmed its 12-month return to 7.5 per cent, short of the market’s 7.8 per cent gain in the year before.
Looking at industry sectors, tech companies got a boost last year, following their US peers as artificial intelligence progressed, while financial stocks – spurred on by Commonwealth Bank – were also among the best performers. Australian market watchers have raised concerns over what another Trump administration and an uncertain Chinese economy could mean for the local bourse in 2025 as markets come off a prosperous 2024. Analysts view Trump’s inauguration on January 20 as the first major test for the Australian sharemarket in 2025, which is likely to be followed by the Australian Reserve Bank’s interest rates decision on February 6.
Some of Trump’s policies – including new trade tariffs – spell trouble for global markets. IG market analyst Tony Sycamore said Trump’s immediate actions following his inauguration would be “very important” for the health of the Australian sharemarket. “Most of the forecasts that I’ve seen say it’ll be a good year for the stock market if Trump does this or that,” Sycamore said in late December.
“It depends on whether Trump prioritises tax cuts, regulation and cutting the fat off the US bureaucracy, or whether he goes for the tariffs.” While the prospect of increased tariffs has accelerated inflationary fears, Trump’s agenda is also forecast to stimulate growth for big tech, industrial and mining stocks, and the banks, which are expected to enjoy increased borrowing demand as interest rates are lowered in 2025. Moomoo market strategist Jessica Amir.
Credit: Louie Douvis “Trump is quite supportive of the stock market in general,” Jessica Amir, a market strategist at Moomoo, said in an interview last week. “Cutting taxes, regulation and red tape is really good for tech stocks, especially the chip sector.” AMP chief economist Shane Oliver has predicted the Australian dollar could face a “rough ride” under Trump, though he noted that lower spending in the US could also put upward pressure on the Aussie dollar.
“It wouldn’t surprise me if, as the US economy cools down into next year, that it leads to lower services inflation, which leads to lower inflation,” said Oliver, who expects constrained global growth in 2025. “The Aussie dollar could turn less than 60¢ on the downside, or head towards high 60s if the US Federal Reserve turns dovish and the Chinese stimulus comes strong.” The RBA is expected to cut interest rates as early as February, as underlying inflation falls further and unemployment rises.
The federal election, slated for sometime between March and May, might prompt an increase in government spending, although it is unlikely to influence short-term economic policies. With Bloomberg.
