5 Key Financial Lessons We Learned in 2024

Central banks have done a great job at bringing inflation down from their recent highs, but it remained a key concern throughout 2024. We continued to see price increases affect both consumers and businesses globally. Even though the headline rates reduced steadily throughout the year, the lingering effects were still felt across major economies.

It also served as a reminder that even if inflation isn’t an immediate concern, investors always need to be wary about how inflation spikes could impact their portfolios. When considering investment opportunities, they should be weighed up against prevailing inflation rates so that the real return can be measured against the risks involved.

For long term wealth creation and preservation, the number one priority of an investment portfolio should be to negate the impact of inflation.

In 2024, interest rates plateaued following rapid hikes in prior years. Central banks, including the Federal Reserve, the Bank of England, and the European Central Bank, shifted focus from raising rates to a holding pattern as inflation moderated.

We’ve even seen some rate cuts in the latter half of the year in an attempt to bolster economic growth, which is likely to be good news for investors. Stable interest rates also open doors for refinancing debt and rebalancing portfolios. 

Fixed-income securities, like bonds, gained renewed appeal as yields became attractive compared to equities, after experiencing some of their highest levels of volatility ever during the previous rate rise cycle.

The key lesson here is that interest rates can have a huge impact on investment portfolios. One of the best ways to manage this risk is to ensure sufficient liquidity. This allows for changes and adjustments when interest rate conditions shift. 

The stock market in 2024 was a mixed bag, with periods of volatility driven by geopolitical tensions and corporate earnings adjustments. But certain sectors — such as tech — bounced back strongly as confidence returned to the market.

In short, it’s a bit of an uncertain time. One trend that has been clear is the shift towards quality companies. Investors gravitated toward companies with strong fundamentals, consistent cash flows, and proven resilience. Growth stocks saw selective recovery, particularly in AI-driven industries.

All in all, market timing remains a challenge, underscoring the value of a long-term, diversified investment strategy. With interest rates policy beginning to loosen and plenty of movement in the political sphere, there could be some positive signs in 2025. The key is to remain invested in order to take advantage of them when gains come.

Here, we’re talking about broad themes that could impact investors. In recent years some examples have been Covid, inflation, AI and a push towards ESG. This is an area that presents arguably the biggest changes to how 2025 and beyond could play out.

The performance of the tech sector in 2024 has shown us that AI is likely to continue to drive significant stock value as it becomes more integrated into our daily lives. This trend isn’t looking like slowing down anytime soon.

There has also been a significant rise in conflict across the world, and unfortunately this also doesn’t look likely to abate in 2025. This presents both opportunities and risks for investors, along with the likelihood of increased volatility across the board.

A different but related market shift which has been ongoing for a number of years and looks to accelerate is that of protectionism. Highlighted by Brexit, there are continued pressures on the EU as member countries wrangle with difficult issues such as immigration. On the US side, the election of Donald Trump signals the prospect of many protectionist policies to come, such as tariffs on overseas goods.

The world is more integrated and dynamic than ever. In investment terms, that can also lead to increased volatility and correlation in different markets around the world. One of the biggest lessons from 2024 was the critical role of proactive financial planning. 

Whether it was managing debt amid higher rates, rethinking retirement strategies in light of inflation, or reallocating portfolios to align with shifting market trends, having a plan proved invaluable.

This is only going to become more important going into 2025, especially as global cost of living pressures create a lower margin for error with long term retirement planning.

The financial lessons of 2024 can help guide the roadmap for the year ahead. Here are some actionable steps to take into 2025:

The overarching trend is that of uncertainty. Through 2024 and likely into 2025, there’s plenty of good news, and plenty of bad news. The key to a bright financial future is knowing how to navigate safely through both sides of this coin.

Whether you’re focused on preserving wealth, growing your investments, or planning for retirement, having a tailored strategy is essential.

At Hoxton Wealth, we’re here to guide you every step of the way. Our expert advisers can help you refine your portfolio, adapt to market shifts, and create a personalized financial plan for 2025. Contact us today to start preparing for a financially successful new year.