Market momentum waned in December, partly due to the Federal Reserve's decision to cut interest rates by 0.25%, while signaling a slower pace of easing for the upcoming year.

This decision tempered investor expectations and led to profit-taking in equities, which also caused the dollar to rise.

From a sectoral perspective, the technology sector ended the year higher, buoyed by semiconductors, while more cyclical sectors such as energy and financials experienced sharp declines.

European markets ended the year on a positive note, despite a drop in its largest capitalization, Novo Nordisk, which disappointed investors following the announcement of results that fell short of expectations for its new experimental anti-obesity drug.

Emerging equity markets exhibited some regional disparities, with a sharp rise in China and declines in Korea and Latin America

As we enter 2025, we are adopting a more selective approach to the US exceptionalism trade. With the momentum in US growth expectations potentially having peaked, we have shifted our focus towards lower-valuation US stocks and diversifying our investments into European and emerging markets. The average 1-Year Fw P/E of the portfolio moved from 30x beginning of March to 23x end of December.

After Trump’s elections, markets made drastic distinctions between the perceived 'winners' and 'losers' of Trump's policies of which the healthcare sector was part. We expect a rebound from our very diversified positioning within the sector which includes pharmaceuticals, health insurance, pharmaceutical distribution, and medical devices.

In the technology sector, our strategy is to diversify our investments along the value chain, focusing on niche companies with high performance potential that are sometimes under the radar. Many critical components of the technology value chain are located in Taiwan and South Korea, such as TSMC, memory chip maker SK Hynix, and small to mid-cap companies like Elite Material and Lotes.

In the United States, we maintain a diversified portfolio that strategically balances high-growth stocks with relatively high valuations, such as Nvidia, Amazon, and Microsoft, alongside stocks with lower growth prospects but high visibility and attractive valuations, like McKesson.

Outside the US, our European exposure is limited to select quality stocks that trade at a discount, particularly when compared to their American counterparts. In emerging markets, our focus is predominantly on stocks in Asia that offer attractive valuations.