Looking back at 2024 while memories are still fresh, and attempting to summarize the year's market dynamics in a few key terms, one quickly arrives at phrases like Trump’s election victory, AI boom, stock market rally, gold’s all-time high, Bitcoin reaching $100k, the global interest rate pivot, and more. These highlights underscore the extraordinary nature of the past year in which almost all asset classes rose—except global government bonds. This is particularly surprising given the Federal Reserve and the European Central Bank’s aggressive interest rate cuts.
In the equity markets, artificial intelligence, and the chips required for it, dominated as they had in 2023. NVIDIA's stock price nearly tripled over the year (+180% in USD), competing head-to-head with Apple for the title of the world's largest market capitalization (USD 3.2 trillion). However, not all semiconductor manufacturers fared as well. While Broadcom Inc. more than doubled its value, Intel, the former industry leader, lost more than half its value, and AMD also posted significant losses.
Within the "Magnificent 7," 2024 brought mixed results: alongside NVIDIA, Meta, and Tesla performed strongly, while Microsoft saw gains below the S&P 500 or even the NASDAQ Index. Investment in OpenAI, the creator of ChatGPT, appeared not to pay off significantly. The major U.S. indices—the S&P 500, Dow Jones Industrial Average, and NASDAQ Index—set successive record highs, while the U.S. dollar appreciated by 15% against the Swiss franc. The strong performance of U.S. stocks, combined with this currency effect, also boosted the MSCI World Index, particularly for non-U.S. investors. In CHF terms, the global benchmark rose by 28% in 2024, marking its best performance since 1999—let’s hope this isn’t a bad omen.
With its risk-optimized approach, OLZ funds understandably lagged behind this rally. The White Fleet Equity World Optimized ESG (LU1013689630) returned 15.82%, significantly trailing the benchmark’s 27.78% but still delivering a very solid absolute return with volatility of only 8.8%, compared to the benchmark’s 12.9%. Moreover, the fund limited the maximum interim loss in the summer of 2024 from 12.5% to 7.1%. This demonstrates that our approach delivered exactly what it was designed to achieve.
Considering the CHF-hedged class, which neutralizes the currency effect of our significant U.S. underweight (23.2% vs. 73.9%), the performance gap was even narrower. The OLZ Equity World ex CH Optimized ESG 2 CHF hedged (CH0376805252), an important fund for our institutional investors, rose by 12.9%, while the currency-hedged benchmark achieved 18.8%. With the fund’s extremely low volatility (6.9% vs. 11.0%), we even achieved a higher risk-adjusted return (Sharpe ratio of 1.89 vs. 1.64). This shows that low-risk investing can produce attractive results, even in bull markets!
Another approach to reducing risk is employed by the OLZ Equity World Dynamic 0-100 (CH0420179720), which dynamically adjusts its equity exposure in a globally market-weighted portfolio based on a variety of trend and risk signals. In 2024, equity exposure was only briefly reduced (early August) due to a risk overlay and was subsequently raised back to 100%. This also reflects the strong bull market investors enjoyed. Investors in the OLZ Dynamic 0-100 fund achieved a strong annual return of 26.3%.
The Swiss stock market had a less stellar year, despite the Swiss National Bank’s (SNB) leading role in executing the interest rate pivot. Despite the gradual reduction of the key interest rate from 1.75% to 0.50%, the SPI managed an annual performance of only 6.2%, significantly lagging behind global markets. Similarly, our OLZ - Equity Switzerland Optimized ESG (CH0118503355) rose by only 3.4%, albeit with lower volatility (8.1% compared to the SPI’s 10.8%). Better results were achieved by the OLZ Equity Switzerland Small & Mid Cap Optimized ESG (CH1183522353), which gained 7.4%, outperforming the SPI Extra (3.8%) with very low volatility (7.7%). The Sharpe ratio of the SPI Extra (0.37) was significantly exceeded by our fund (0.93), although the reliability of this metric over short time horizons is inherently limited.
Emerging markets displayed more dynamism in 2024 after challenging years, particularly in China. The market-cap-weighted MSCI Emerging Markets ex China Index, driven by semiconductor stocks, posted significant gains. TSMC, the index heavyweight, rose by approximately 80%, pulling the index to an annual return of 11.5%. Our defensive low-risk approach achieved slightly lower returns (8.8%) but with significantly lower risk (volatility of 10.7% vs. 15.1%, maximum loss of 8.6% vs. 14.6%), resulting in better risk-adjusted returns (Sharpe ratio of 0.79 vs. 0.75).
In China, government and central bank stimuli led to a market surge of nearly 29.4% (MSCI China). While our lower-risk portfolio understandably lagged slightly behind, it still posted substantial gains (+18.8%). We significantly reduced portfolio volatility from 25.0% to 18.1%, resulting in a Sharpe ratio of 1.0.
Beyond equities, the past year surprised with both the continuation of the gold rally and renewed dynamism in Bitcoin prices. Both assets reached multiple new all-time highs, with annual gains of 37% (gold in CHF) and 138% (Bitcoin). This is particularly remarkable given the strength of the stock markets and the U.S. dollar’s appreciation.
Bonds were the only major asset class to lose value in 2024. After sharp declines in 2021 and 2022, followed by a recovery in 2023, 2024 proved challenging for fixed-income investments. The rise in yields on longer-dated government bonds, despite significant cuts in key interest rates by major central banks, signals a lack of investor confidence in fiscal discipline. U.S. 10-year Treasury yields rose by 15 basis points the day after Donald Trump’s election victory and ended the year at 4.6%, up from 3.9% at the start of the year.
It remains to be seen what developments the new trading year will bring. Will the factors that shaped markets in 2024 continue to play a central role? We will closely monitor whether the AI hype, now in its third year since ChatGPT’s breakthrough, continues to dominate. With Donald Trump’s return to the White House on January 20, political turbulence may also resurface. Amid this backdrop, a risk-conscious investment style and targeted portfolio diversification will be more important than ever in navigating the complexities of the coming year.
