Market comment year 2024
2024 was a positive year for financial markets.
Stock markets have risen unevenly, with the US markets standing out, driven mainly by the so-called ‘magnificent seven’ (Apple, Amazon, Alphabet, Meta, Microsoft, Nvidia and Tesla), which are leading the artificial intelligence revolution, while Europe remains more limited by a stagnant economy and political uncertainties.
In China, the housing market crisis persists and consumer spending has not yet fully recovered from the pandemic. Nevertheless, the indices have been boosted by expectations that the government can implement expansionary fiscal policies to revive the economy.
Recently, China has also shown that its companies have made significant progress in artificial intelligence and innovative technologies despite restrictions imposed on Beijing on the import of strategic US technologies.
The latter part of the year has been dominated by Trump’s election and questions surrounding what the aggressive pursuit of the “America First” concept might mean for global markets. The overall reaction has been positive, with growth-friendly policies in terms of deregulation and tax cuts anticipated.
On the other hand, bonds have not performed well. The economic slowdown that many expected has not happened; in fact, the policies announced by the new US administration could lead to an acceleration of economic growth and inflation expectations.
As a result, the long end of government bond yield curves, especially in the United States, has risen again even as central banks have cut policy rates.
However, corporate bonds have performed well due to overall balance sheet strength and continued economic growth.
The dollar has strengthened due to the solid performance of the US economy and the prospect of tariffs being implemented by the new Trump administration.
Gold has posted another remarkable 27% gain over the year. Central banks continue to buy gold as they diversify away from the dollar following the freeze of Russian reserves.
Another asset that has emerged as a winner in 2024 is undoubtedly Bitcoin, with its price increasing by 120% over the course of the year. This increase is attributed to the approval of new ETFs by the SEC and the Trump administration declaring itself pro-crypto while suggesting the possibility of creating a Bitcoin strategic reserve.
Accumulated returns of the average investor profile in inbestMe
At inbestMe the average investor profile is 7 (7/10)*. This average investor profile has remained almost unchanged over time since we started our activity, so we find it quite representative.
In the graph above on the left we can see how the average investor profile* of inbestMe has obtained a cumulative return of 66.6% from 01/01/2017 to 31/12/2024, that is, 49 percentage points more than the “Mixed Variable Income” category according to Inverco, which in the same period is 17.6%.
On the right we see how the average inbestMe investor profile obtains an annualized return (CAGR) of 6.5%, which is 4.5 percentage points more than the “Mixed Variable Income” category according to Inverco, which in the same period is 2.0%.
These returns are undoubtedly exceptional both in absolute and relative terms compared to the benchmark index** and we are satisfied because it is one of the reasons that motivated us to create inbestMe: to help our clients invest better (obtain a good return) and with high personalization.
To make this calculation, we weight the number of “investor” clients per profile over the total. To do this, we consider the different index fund profiles ranging from 1 to 10. The savings portfolio, target portfolios and bond portfolios are excluded from the calculation of the average investor profile.
** The reference index for profile 7/10 is the “Mixed Equity” category of Inverco.
If you want to see more details about the returns of our portfolios (in this period or in others and for all types of portfolios and risk profiles) you can consult the inbestMe returns page on our website where you will find the comparison with other reference indices and risk ratios such as volatility, Sharpe ratio and maximum drawdowns and for the different periods. This data is updated at the beginning of the month with the data accumulated up to the close of the previous month.
In the example we show the data of profile 7 together with volatility data (10%), a good Sharpe Ratio (0.54) and the maximum drop supported by the portfolio (-24.7%) experienced in the Covid period.
These returns have undoubtedly benefited from a very good year in 2024. Let’s look at more details of what happened in the year below.
Evolution of our index fund portfolios during 2024
All of our diversified portfolios of index funds and ETFs posted positive returns in 2024. Diversified portfolios are portfolios for investors who want to invest for the long term. The broad diversification they provide in terms of exposure to different asset classes helps make them resilient to most market conditions.
The profitability of all Index Fund portfolios, in line with what has happened in the markets, has been exceptional and has ranged between 4.3% and 18.9% in 2024, with an average of 11.4%, compared to an average profitability of 6.9% for all Spanish investment funds, as reported by Inverco. That is, on average our portfolios have had a higher profitability of 4.5 percentage points.
Evolution of our ETF portfolios until December 2024
Diversified portfolios can be built with both index funds and ETFs. The level of risk and exposure for the corresponding profiles is similar, but the performance may be slightly different, since the availability of investment vehicles is not exactly the same.
As for ETF portfolios, profitability is between 4.2% (profile 1) and 14.9% (profile 10), with an average of 10.0%, 3.1 percentage points above the average weighted profitability of investment funds in Spain (according to Inverco).
Comparative returns of the different inbestMe portfolios until December 2024
At the end of 2024, the average profitability of all inbestMe portfolios aimed at medium and long-term investment (that is, excluding the Savings, Objective and Bond portfolios, which we analyse separately) has been 8.9%, or 2 percentage points above the average weighted profitability of investment funds in Spain (according to Inverco).
The portfolios with the best results have been those of Standard Index Funds, achieving an average of 11.4% (2.5 points above the average).
This is followed by the Standard Euro ETF portfolios, which have shown an impressive return of 10% on average, outperforming the average by 1.1 percentage points.
SRI portfolios have generally been the worst performers as SRI funds have performed relatively worse during 2024. The return of the SRI global equity index has been almost 5 percentage points worse than the overall index.
Accumulated returns and CAGR as of the end of December 2024
Our diversified portfolios of index funds and ETFs are designed for the medium and long term, and it is in this area that they must be specially analyzed.
The following chart shows a comparison of all the profiles in our portfolios compared to the different categories of Inverco’s statistics for investment funds in Spain, from 2017 to the end of 2024, so that we can compare our portfolios with investment funds that cover the same asset class and have a similar risk profile. The cumulative return ranges from 8.1% for profile 1 to 97.1% for profile 10.
On average, our portfolios achieve a cumulative return of 50.9% compared to Inverco’s 17%, which is 33.9 percentage points higher.
This translates into an average annualized return (AER) of our portfolios of 5.0%. This value is much higher than the average of Spanish investment funds (1.8%) and, for each risk profile, the returns are much higher than their respective benchmark index, meaning that both the low-risk and high-risk portfolios outperform the average of their comparable mutual funds.
On average, our portfolios achieve an annualized return of 5.0% (CAGR) compared to Inverco’s 1.9%, which is 3.1 percentage points higher. It is noteworthy that in all the different categories our portfolios outperform their reference. In particular, this difference is more significant (in percentage points) in profiles 6 to 9 where most of our clients are concentrated, with differences of 3.5 to 6.4 percentage points. The differences in low profiles are also significant in relative terms, multiplying by 4 or 5 times.
