[Portfolio Updates] 2024 Portfolio Review

If there’s a way to describe the markets in 2024, the word would be Deja Vu.

2024 felt very much like 2021 where the market is driven by an Artificial Intelligence frenzy and risk-on attitude by investors without much regard for underlying fundamentals.

The difference this time round, however, is that there is lesser uncertainty revolving around a “hard landing” or global economic recession.

That said the disparity between the different regional economies has been getting more drastic with the Western developed market peaking and the Eastern developing market bottoming.

In this article, we’ll run through

Portfolio fund performances
Explaining the price actions
Actions taken in 2024

1: Portfolio Funds Performances

On a fund level, all the funds that we’ve invested had registered positive returns in 2024 as a result of returning investor confidence and lesser uncertainty surrounding a possible global economic recession.

On a portfolio level, due to the massive pump in the global markets – driven by the S&P 500 – accompanied by a slow but steady recovery in the Asia markets, the overall portfolio now is in the green, erasing the losses that were incurred during 2021 and 2022 as the Asian market experienced a near 50% drawdown.

For individual performances, please refer to your investment account as the return may vary depending on when you start investing and also the extent to which you followed my recommendation in the last few years.

That said, bear in mind that a single-year performance is not meaningful and neither would it affect our long-term overarching strategy.

As investors, we should focus on the long-term prospects while having a good understanding of what may be causing short-term performances to identify possible opportunities or threats to our long-term performances.

Moving on, let us take a look at how the markets have performed over the past 12 months.

2: Explaining Price Actions

Global Equities (S&P500)

In 2024, the S&P 500 had experienced a back-to-back double-digit return having grown over 20% in 2023. The strong price action is driven yet again by the hype revolving around Artificial intelligence for the first half of 2024 and the return of Donald Trump as the next president of the United States for the second half of 2024.

In totality, the information technology sector accounted for more than 40% of the total returns experienced in 2024 while the the so-called "Magnificent Seven", i.e. Apple, Amazon, Microsoft, Meta, Alphabet, Tesla and Nvidia accounted for more than 50% of the S&P 500's return for the year.

Since 1930s, there have been 10 instances where the market experienced back-to-back returns of more than 15%. Based on the market history, it is likely that the momentum can be carried forward in 2025 as the market continues to melt up until a trigger (i.e. recession) happens that causes a correction to occur as investors might suddenly pay attention to valuations again.

As we’ve seen and experienced since 2018, investors can't time the market and I don’t think we should base our decision on speculative factors. As such, as an analyst and investor myself, I do not have an answer to your question of whether the S&P 500 will continue to grow in 2025.

The only thing that I am certain about today is that the valuations are stretched to levels last seen in 2021 – and we all know what happened in 2022 (a correction of over 20%).

I’ll take the necessary actions as and when I feel it is needed but for now, there is no clear indicator of a potential market bubble that we’ve seen back in the 2000s and hence it doesn’t warrant an action.

Asia & Emerging Market Equities

In the first half of 2024, the Asia and Emerging markets experienced a steady recovery at the back of China’s economic recovery and a more accommodative stimulus stance.

However, as the election draws near and upon the confirmation of Donald Trump’s presidency results in the second half of 2024, the market retracted due to expectations of harsher trade conditions and unfavourable policies by the West that may pose a threat to both Asia and the Emerging countries.

Contrast the performance of Asia and Emerging markets with that of the S&P 500, it is clear that both Asia and EM are lagging significantly behind with valuations continuing to remain at depressed levels despite a steady recovery in the fundamentals.

In my portfolio review last year, I mentioned that for Asia equity to recover, investors should pay attention and watch out for supportive policies, upbeat growth and geo-political stabilization in 2024.

While we’ve seen the supportive policies being rolled out in 2024, the upbeat growth has yet to materialize due to the response lag and we’re likely going to see it materialize in 2025.

However, with the inauguration of President Trump in 2025, it is unlikely we will see any meaningful form of political stabilization – at least in the global trade arena – which may pose a threat in the short term that may cancel out the positive impact of the supportive policies.

As such, what we need to look out for in 2025 would be the continued stable recovery and growth of Asia and Emerging market fundamentals – at a level that may offset the negative impacts of any tariff and trade war that may come their way.

3: Actions Taken in 2024

With all that being said and done, let us examine what actions were taken this year and potentially what actions could you expect moving into 2025.

iFast Portfolio

For the iFast portfolio, no action was taken in 2024 as the current portfolio design and structure are already well-positioned for achieving our long-term investment objectives given the changes made back in October 2023.

For those who may have forgotten, I’ve documented the basis and logic behind the trade in the following article here: [Portfolio Updates] Changes To Strategic Allocation

Moving forward, I will probably initiate a portfolio rebalancing around June 2025.

FPI Portfolio

In my portfolio review last year, I mentioned that I may consider introducing another Asian fund into the mix to lower the overall management risk in the second half of 2024 as I would like to examine the market situation and the fund performances further before making any conclusion.

In October 2024, I decided to further diversify our Asian equity exposure into two separate funds with different management styles (Growth and Value). This was done to further reduce the impact of management risk and investor preferences during different periods where one investment style may be more preferred than the other.

You can read more about the basis and logic behind the move here: [Portfolio Updates] Introduction Of 4th Fund For FPI Portfolio

Moving forward, a portfolio rebalancing will probably be done in the later months of 2025 depending on market conditions.

Final Message

Given the inauguration of Donald Trump as the 47th president of the United States on 20th January 2025, anything can happen in the next four years.

With the expectation of further global trade tensions as the result of the Western economy’s pursuit of protectionism, what is certain is that this too shall pass.

While the next 4 years will be an interesting period to experience, it does very little to what we’re expecting to materialize in the next 15 to 25 years as the structural trends that are already in place are unlikely to be stopped.

In the ideal situation where the global economy remains stable and markets revert to mean, our portfolio should be well positioned to profit from the short-term disparity. If not, then we’ll have to be a bit more patient for the fundamentals to lift the Asia market back to its original levels.

Hang tight for 2025 is going to be a bumpy year ahead!

Daniel is a Certified Financial Planner (CFP®) and a licensed Financial Advisor by MAS.

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