Despite declines during the month of December, equity markets surprised investors positively during 2024. The U.S. markets stood out, particularly LargeCap stocks, which achieved another year with returns above 20%; a rare feat for the S&P 500, which has only had consecutive annual returns above 20% on four occasions since 1900. The main U.S. indices, the S&P 500 and Nasdaq, ended the year with gains of 23.31% and 28.64%, respectively. Emerging markets, meanwhile, ended the year with a return of 8.05%, driven by a strong rebound in China during the last quarter of the year and the good performance of Taiwan and India during the period; developed markets ex-USA lagged behind with only a 4.35% increase.

With respect to the different sectors of the S&P 500, all 11 sectors presented positive returns during the period. Communication Services (+34.70%), Financials (+30.55%) and Consumer Discretionary (+26.51%) stood out; while the Materials, Healthcare and Real Estate sectors returned only 0.14%, 2.47% and 5.07%, respectively. U.S. corporate results were favorable, with enthusiasm for artificial intelligence driving technology and semiconductor companies. With this, S&P 500 companies' earnings are expected to have increased by 9.5% during 2024, while the market expects a 14.8% increase by 2025; we will see if it materializes.

Turning to the debt markets, they ended the year with a negative tone and affected by increases in long-term interest rates; derived from President-elect Trump's agenda, whose trade, immigration and tax policies would tend to be inflationary in the medium term. Thus, the main fixed income indices of aggregate bonds and investment grade corporate bonds yielded 1.25% and 2.13%, respectively during 2024. High Yield bonds stood out positively by generating gains in the order of 8.19% during the year.

The year 2024 was marked by both electoral and geopolitical uncertainty. In more than 60 countries, voters went to the polls in what was a complicated year for the ruling parties and traditional politics. In the United States Trump's comeback with both houses surprised markets. In the United Kingdom, the shift was to the left, with the Labor Party regaining power after 14 years of Conservative governments. Likewise, early elections in France over the summer punished the parliamentary position of Emmanuel Macron's Renaissance Party. While the Mexican story is already known. On the geopolitical side, conflicts continued between Russia and Ukraine, while throughout the year the conflict in the Middle East escalated with Israel and Iran exchanging attacks during the month of April. Although the global environment was challenging, the markets kept the noise down and were guided by economic and financial fundamentals, mainly in the United States, whose economy is solid, in full employment and growing above its potential.

By 2025, we expect the U.S. economy to grow between 2-2.5%. The environment should be favorable for U.S. stocks thanks to President Trump's America First policies. For the rest of the world, we expect a more challenging environment, starting with weak growth in Europe, a complicated trade outlook for China and the rest of the emerging markets, as well as difficult negotiations and low growth for Mexico. Likewise, we see a strong dollar against the rest of the currencies, including the Mexican peso, which will be subject to the tariff policies of our neighboring country.