What 2024 Taught Our Portfolios: A Year in Review
Explore our 2024 Year in Review, highlighting how markets moved, how Simpan portfolios performed, and what we learned for the year ahead.
Looking Back at 2024
2024 has been a roller coaster of a year in financial markets, to say the least. Here’s a look back at how the year unfolded, how we performed, and what we learned as we enter the new year.
Q1: Stubborn U.S. Inflation Leaves the Fed Hanging
We started 2024 hoping the Fed would soon begin lowering interest rates. Many thought they'd start by the end of the first quarter. But then, inflation surprised everyone by jumping higher in February. This made it tough for the Fed to cut rates, and the markets got nervous.
This change in the Fed's plans, and the global market's outlook, meant that interest rates were likely to stay high for longer. This caused investors to pull money out of emerging markets and put it into safer U.S. Treasury bonds, since those bonds were still offering decent returns.
Q2: Flight to Safety
The second quarter brought a big change in how the market felt. The Fed, which had been focused on low interest rates to boost the economy, suddenly shifted gears and put controlling inflation as their top priority. This surprised everyone and created a lot of uncertainty in the financial world. Many investors got nervous and moved their money to safer investments like bonds, which caused stock prices to fall.
Things started to look better in June when U.S. inflation cooled down to 3%, the lowest in a while. This gave everyone hope that the Fed might start cutting interest rates by September. The stock market rallied towards the end of June, setting the stage for a potentially better third quarter.
Q3: Bullish Sentiments Take Center Stage
The third quarter brought good news for global markets. Falling inflation in the U.S. and signs of a slowing job market increased hopes that interest rates would be lowered. Indonesia's central bank cut interest rates for the first time in years, and the U.S. Federal Reserve also started to lower rates.
This positive news caused a big rally in the stock market, with the Jakarta Composite Index (JCI) reaching a record high. The Indonesian Rupiah also strengthened significantly against the U.S. Dollar.
A Surprise Twist from China
Unexpectedly, China's late-September stimulus announcement changed the market's focus. This announcement attracted a lot of investment money into China, causing a major surge in the Chinese stock market. In just two weeks, the Chinese Stock Index jumped by a remarkable 33.7%, leading into early October.
Q4: A Year of Transitions and Opportunities
The fourth quarter of 2024 brought major leadership changes and economic shifts. In Indonesia, President Prabowo Subianto's inauguration in October sparked a market rally, while in the U.S., Donald Trump’s re-election in November strengthened the dollar and reignited interest in cryptocurrencies, pushing Bitcoin to a record $100,000, while the S&P 500 posted all-time highs.
Central banks also played a key role in shaping the economic narrative. The Federal Reserve implemented its second rate cut of the year, with markets expecting further reductions in December's FOMC meeting. However, Bank Indonesia (BI) maintained its rates throughout the quarter, prioritizing rupiah stability over growth. Despite these measures, the rupiah weakened to ~16,100/USD by December, levels last seen after China's stimulus announcement earlier in the year.
Impacts of FOMC Hawkish December Meeting
The Federal Reserve hinted that they might not lower interest rates as much next year as some people hoped. This has scared central banks in other countries, especially those with developing economies. They're trying hard to protect their own currencies.
Because the U.S. dollar is getting stronger, currencies like the South Korean won, the Indian rupee, and the Indonesian rupiah are losing value. This is not a good news for these countries. Higher interest rates in the U.S. could make things worse by pushing money out of their economies and causing prices to rise.
On top of that, the new president's plans for trade and immigration are also making things uncertain for these countries.
Milestones Achieved
We launched three new funds to help you build a well-rounded investment portfolio
Simpan Bond Fund (SBF)
For investors who prioritize safety and stability.
SBF is a portfolio of Indonesian Government Bonds.
Lower risk and steady returns, or if you want to balance out the riskier parts of your portfolio.
Simpan Sustainable Equity Fund (SEF)
For investors with a longer-term perspective and a higher risk tolerance - and want to invest with Sustainability in mind.
SEF is a portfolio of ESG-screened stocks, benchmarked by Morgan Stanley Capital International (MSCI)
Higher risk and volatile, but potentially higher returns from stock markets.
Simpan Cash Syariah Fund (CSF)
For investors who wish to earn a higher yield on their cash and have the ability to withdraw their investments on the same day.
CSF is a portfolio of Bank Time Deposits from Syariah-compliant banks.
Low risk and steady returns, or an alternative to your savings account.
Won Innovative Fund Management Award
In October 2024, Simpan was awarded Innovation in Fund Management for our Sustainable Equity Fund. This fund invests in companies aligned with UN SDGs, actively managed against a custom MSCI index. We aim to deliver strong, sustainable returns.
How Our Funds Performed
Reflecting on 2024 & Looking Ahead
There’s a lot to learn from this year. We're not entirely satisfied with performance, especially on our riskier portfolios containing stocks. We optimized our stock-selection strategy a number of times given how quickly the economic landscape changes, and a shallow domestic capital market.
The key lesson for us is to be more tactical (and quick on our feet) in how we invest, and balance out our natural preference for longer-term holdings that we like fundamentally. Actionable steps taken into the new year:
Embrace momentum and market flows tactically, in light of a shallow capital market.
Lock in profits faster to protect gains.
Be more discerning about when we buy and execute trades (market timing)
As we move into 2025, we're committed to navigating these changing market conditions and helping you reach your financial goals. Thank you for trusting us to be a part of your financial journey. We look forward to continuing to serve you for many years to come. Wishing you a Happy New Year!
Yours truly,
Simpan Investment Team