3 crucial investment lessons to learn from market events in 2024

13 January 2025

Looking back on 2024, it’s fair to say that it was somewhat of a tumultuous year marked by volatility and significant market events. Indeed, from interest rate changes to major elections across the globe, the economic landscape was uncertain at times.

Fortunately, despite some events causing uncertainty, markets ended the year on a positive note, with JP Morgan reporting that six major world indices all posted healthy annual gains.

Read more: Your Q4 2024 global market update

As an investor, it’s normal to feel worried when markets fluctuate, but now is the time to reflect on what these events can teach you going forward. Understanding the lessons you can glean from the past year could help you feel more prepared for whatever 2025 might bring.

So, with that in mind, continue reading to discover three crucial investment lessons to learn from 2024.

1. Interest rate hikes in Japan, the “August sell-off”, and the importance of remaining invested

Perhaps one of the more significant global fiscal events of 2024 was the Bank of Japan’s (BoJ) decision to raise interest rates for the first time in 17 years.

On 19 March 2024, the BoJ increased the benchmark rate from -0.1% to between 0% and 0.1%, the World Economic Forum reports, ending a long period of negative interest rates that had been in place since 2016. This shift was driven by improving economic indicators, such as steady inflation and wage growth.

However, the decision had significant consequences, especially for global markets. Since the Japanese Yen strengthened, this disrupted forex markets and triggered a sell-off in equities.

Then, on 31 July 2024, Japan’s central bank implemented a further interest rate hike, bringing the rate to around 0.25%, creating more market turbulence by early August. The Associated Press reveals that the Nikkei 225 index in Japan saw its largest single-day decline in 37 years, losing 12.4% in one trading session.

This was a key moment in what is now known as the “August sell-off”, which destabilised markets around the world. Even the US S&P 500 US saw its worst day in nearly two years on 5 August 2024, falling by 3%, the Guardian reveals.

While these events were undoubtedly concerning at the time, they serve as an important reminder that market volatility is an inherent part of investing. Reassuringly, historical data shows that, over time, markets usually recover and follow a long-term upward trajectory.

Even after the August sell-off, the Associated Press reports that the Nikkei 225 rebounded by 10.7% within days of the decline. Meanwhile, the Guardian highlights the fact that the S&P 500 also saw its largest single-day increase since November 2022 shortly afterwards.

This shows that, even during times of volatility and turbulence, it’s vital to trust in your financial plan and stay the course.

Selling your investments out of fear of short-term loss could crystallise potential losses into real ones, while remaining invested might allow you to benefit from an eventual market rebound.

2. Trump’s election victory warns us against emotional investing

2024 was a bumper year for elections around the world, with perhaps the most pivotal being the US presidential election.

It was a gripping race, with President Biden dropping out just three months before the vote over concerns regarding his mental capacity, making way for Kamala Harris to take centre stage.

Republican candidate, Donald Trump, eventually won after the vote was held on 5 November. Shortly after the announcement of his victory, an immediate effect was seen in the markets, which is now being called the “Trump bump”.

Indeed, Fidelity reveals that the S&P 500 had its best week in almost a year, rising nearly 5% over five days. Tesla’s share price rose almost 30%, which was potentially fuelled by speculation around tariffs on the company’s Chinese rivals and Tesla CEO, Elon Musk, showing outward support towards Trump and his planned policy changes.

While the initial market reaction seemed to be optimistic, it’s important not to be swept away by the excitement of these upticks.

Granted, it’s always encouraging to see the value of your investments rise, but the rapid growth following Trump’s election should serve as a reminder to avoid letting emotions drive your decisions. It’s easy to get caught up in the excitement of a market rally and feel the urge to invest in companies that are performing well.

However, you should remember that past performance is not an indicator of future results. Over-excitement could simply lead you to take on more risk than is appropriate for your circumstances.

For instance, last year we wrote about the Magnificent Seven – a group of large-cap US tech stocks that were booming at the time. While most of these stocks are still performing admirably, Microsoft underperformed in 2024, Statista reports. If you’d have been swept away by the excitement of this boom and invested heavily in Microsoft in 2023, you might now be worried about your portfolio being overweighted in one specific company.

As such, in the wake of the Trump bump, it’s vital to take a step back and think carefully about your actions when you feel tempted to make an emotionally charged investment decision.

3. The 2024 Autumn Budget reminds investors to focus on tax mitigation

Another important event of 2024 was the UK’s Autumn Budget. After the Labour Party’s election win, the new chancellor, Rachel Reeves, revealed the party’s first Budget in 14 years on 30 October.

She announced £40 billion in tax rises, hoping to fill the “black hole” in Britain’s finances and rebuild public services.

Among the changes that could have the most direct effects on your portfolio – aside from the new Inheritance Tax rules, which you can read about in our previous article – was the increase in Capital Gains Tax (CGT) rates.

With immediate effect:

• The basic rate for non-property assets rose from 10% to 18%
• The higher rate for non-property assets increased from 20% to 24%.

These changes could mean that more of your investment gains may be subject to tax when you sell assets such as shares, bonds, or property. If you have an especially large portfolio or hold assets that have appreciated in value considerably, this could have significant implications for your future returns.

As such, it might be wise to think about ways to mitigate the effects of these tax changes in 2025.

One practical strategy could be to take full advantage of tax-efficient accounts, such as pensions and Individual Savings Accounts (ISAs). For instance, since investment growth held within your pension is typically free from CGT, you may want to increase your contributions.

Similarly, it might be wise to make the most of your £20,000 annual ISA allowance.

Above all, staying proactive about tax planning in 2025 could ensure that you’re keeping more of your hard-earned gains.

Get in touch

No matter what happens in 2025, we’ll continue to work tirelessly to help you manage your wealth.

To find out more about working with us, please email info@depledgeswm.com or call 0161 8080200.

Please note

This article is for general information only and does not constitute advice. The information is aimed at retail clients only.

All information is correct at the time of writing and is subject to change in the future.

Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.

The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance. 

Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.

The Financial Conduct Authority does not regulate tax planning.