Macro Intelligence: year in review

Article written by Juliette Saly (ausbiz)

Year in review

In this week’s edition of IG Macro Intelligence, we take a look back at how markets performed in 2024.

Ending on a high

The ASX 200 is finishing 2024 on a positive note. As of market close on 16 December, the index was up over 8% year-to-date (YTD), after retreating from an all-time high of 8514 points.

ASX 200 year-to-date chart

The ASX 200 gained more than 11% in the past 12 months.

US markets outshine ASX

While positive, the gains are not as impressive as those witnessed in the United States (US). The S&P 500 index has hit record highs on multiple occasions throughout the year and is up 28% as of mid-December.

S&P 500 year-to-date chart

Meanwhile, the tech-heavy Nasdaq 100 index is up more than 35% over the year, reaching 20,000 points in early December for the first time.

Tech sector leads the charge

Technology, or more specifically artificial intelligence (AI), has been the dominant theme of 2024.

The rally in the Magnificent Seven has flowed through to sentiment down under, with the ASX information technology (IT) sector gaining more than 50% over the course of the year.

In contrast, the energy sector saw nearly a 20% decline, and the materials sector dropped 13% as geopolitical tensions and weakness in China’s economy weighed on commodities players.

Sector performance chart

Commonwealth Bank drives ASX 200 gains

However, it was the gain in financial stocks, specifically index leader Commonwealth Bank of Australia (CBA), which was the key driver in the ASX 200’s gain.

CBA shares have defied broker caution, rising around 40% YTD, and continually testing records. Shares in the lender reached an all-time high of $160.27 in November, despite fears the stock is overvalued.

CBA daily chart

The average recommendation on index leader CBA is a sell, according to data compiled by Refinitiv, while the mean target price is $101.91, suggesting at current levels, CBA is 35% overpriced.

CBA recommendation

Winners and losers

• Life360

Shares in family safety and location-sharing technology firm Life360 have jumped more than 200% so far in 2024.

Life360 upgraded its earnings before interest, taxes, depreciation, and amortisation (EBITDA) forecast to $36–41 million, exceeding prior expectations. Additionally, the integration of advertising into its platform marked a significant milestone, and means Life360 is poised to drive substantial revenue growth in the coming years.

Life360 daily chart

The average broker recommendation on Life360 is a buy, according to Refinitiv, with a target price of $24.94, meaning the stock can gain another 9% from current levels.

Life360 recommendation

• Pro Medicus

Meanwhile, healthcare technology company Pro Medicus has risen 160% year-to-date. Pro Medicus has been thriving due to strong demand for its imaging software in global markets.

Pro Medicus daily chart

Goldman Sachs recently upgraded its price target on the stock by 26% to $278.00 per share, claiming wider adoption of Pro Medicus's medical-imaging technology looks inevitable.

Pro Medicus recommendation

• Liontown Resources

Heading the other way, shares in lithium producer Liontown Resources have dropped close to 70% year-to-date.

The miner faced several challenges, including a sharp decline in lithium prices and the collapse of a proposed $6.6 billion takeover deal by Albemarle. Additionally, rising costs at its Kathleen Valley lithium project strained the company’s financials.

Liontown Resources daily chart

Most brokers suggest avoiding the stock, however, analysts at Bell Potter have a speculative buy on Liontown Resources with a price target of $1.40, suggesting it could rise 154% from current levels.

Liontown Resources recommendation

• Star Entertainment

Troubled casino operator Star Entertainment shares have also plunged more than 60% year-to-date. Despite efforts to restructure and comply with regulatory requirements, Star faced declining revenues and rising costs.

Star Entertainment daily chart

However, the stock could be a rising “Star” in 2025 if broker recommendations prove correct. Most analysts have a sell recommendation on Star, however the average target price is $0.27, suggesting the stock could gain 32% from current levels.

Star Entertainment recommendation

Dusting off the crystal ball

Donald Trump’s second presidency, United States-China relations, and expected Reserve Bank of Australia (RBA) rate cuts are expected to dominate market sentiment in 2025.

Morgan Stanley has a forecast of 9300 points for the ASX 200 in 2025, in the most bullish case scenario. The analysts say such a scenario would be based on the RBA beginning easing rates early next year, boosting the domestic housing and consumer cycle. Such a scenario, the analysts say, would enhance the performance of banks, consumer-focused, and housing-linked stocks, while also prompting a shift from large-cap companies toward smaller-cap stocks.

In its base case scenario, Morgan Stanley forecasts the benchmark will reach 8500 (a level already reached in 2024). UBS also has a forecast of 8500 points. JPMorgan is less optimistic, predicting the ASX 200 will decline to 7900 points by the end of 2025.

Geopolitical impacts on market dynamics

Meanwhile, Peter McGuire from XM thinks geopolitics could be a market tailwind in 2025, especially for commodities. “A possible truce in the Ukraine-Russia conflict could remove a significant headwind for oil. Additionally, if the incumbent or the new United States administration achieves a Gaza ceasefire, 2025 could be the year that geopolitics takes a back seat.”

On that same theme, Morningstar analysts see energy stocks as some of the most undervalued heading into 2025 as markets fret about slowing demand.

Spotlight on smaller stocks

Morningstar also views opportunities in consumer and communication sectors but says “opportunities are less abundant in the financial services and real estate sectors, which have rallied strongly in the past year on the softening interest rate outlook.” Morningstar says opportunities are most abundant in smaller stocks, with about 60% of their 4 and 5-star-rated stocks outside the S&P/ASX 100 index.