David Grace, AFIC Portfolio Manager, shares insights on navigating a volatile year and the outlook for the coming year.
As we close out 2024, it's fitting to reflect on the year’s challenges and achievements while looking ahead to 2025. The past year has tested markets with persistent uncertainty stemming from inflationary pressures, fluctuating interest rates, and geopolitical tensions. Despite this testing environment, AFIC's commitment to its long-term investment principles and focus on quality companies and leadership meant we continued to deliver value to our shareholders. Looking ahead to 2025, we are mindful of the ongoing uncertainty but confident in the opportunities that will arise for disciplined investors.
Focused on resilience in a challenging macro environment
2024 was a year defined by macroeconomic volatility, with global inflation remaining persistently high and central banks and policymakers in major regions navigating complex challenges to stabilise economies. Additionally, geopolitical uncertainties—ranging from the ongoing wars in Ukraine and Israel to the shifting dynamics of U.S.-China relations—created a landscape of risk and unpredictability. The uncertain operating environment led to high share price volatility for many companies and sectors. At AFIC, our approach is to use periods of short-term volatility to buy quality companies at attractive prices. History shows resilient businesses led by sound management and holding market leadership positions can deliver strong earnings growth over the long term.
Companies in the Information Technology and Financials sectors led market performance in 2024, while the Energy and Materials sectors lagged, reflecting softening demand for commodities from China.
Strategic investments
Businesses like CSL, Goodman Group, and ResMed exemplify the quality we seek. These companies have demonstrated consistent performance even during periods of uncertainty, owing to strong leadership, robust business models, and adaptable strategies that prioritise long-term value creation. The ability to weather economic shifts and adapt to evolving conditions reflects the qualities we prioritise, ensuring our portfolio is positioned for sustainable growth.
CSL and ResMed have both faced headwinds such as rising input costs and regulatory changes, yet their focus on innovation, robust product pipelines, and global reach positions them to continue delivering strong earnings growth. Meanwhile, Goodman Group’s strategic positioning in industrial assets well suited for future data centre development sees the company well positioned to develop facilities to meet this demand.
Looking Ahead
As we look ahead to 2025, the global market remains shaped by a complex geopolitical landscape. Tensions between major powers, supply chain disruptions, and regional conflicts will continue to test global economies. While these conditions will undoubtedly create volatility, we believe they will also unlock opportunities to invest in undervalued assets, particularly in sectors poised for long-term growth.
We’ll continue to prioritise such opportunities with strong financials, experienced leadership, and market leadership positions.