December 2024 offered a diverse landscape across global financial markets, with significant movements across all asset classes. The U.S. dollar displayed remarkable strength driven by positive economic data, impacting currency markets and commodity-linked assets. Meanwhile, equity indices faced volatility influenced by shifting policy expectations and geopolitical developments. Commodities and cryptocurrencies navigated complex conditions, with some standout performances and areas of weakness emerging.

In this comprehensive asset class summary, we break down the key market movements in December, highlight the best and worst performers, and provide insights into how macroeconomic events shaped trading outcomes. Our detailed analysis offers a snapshot of market trends and performance metrics, empowering traders with actionable insights for the months ahead.

Asset Class Summary

Forex
In December 2024, the U.S. dollar exhibited notable strength, appreciating against major currencies. This appreciation was driven by robust U.S. economic indicators, including a stable job market and a strong services sector, which suggested a potential slowdown in the Federal Reserve's rate-cut cycle. Consequently, futures traders increased their net-long positions on the USD, reaching a 33-week high of $28.5 billion. This dollar strength exerted downward pressure on commodity-linked currencies, such as the New Zealand dollar, which saw record net-short positions for the third consecutive week. 

Indices
U.S. equity markets experienced volatility in December 2024, with the S&P 500 declining by 2.50%, bringing its annual return to 23.31%. Investor sentiment was influenced by President-elect Donald Trump's proposed tariff plans, which introduced uncertainty regarding future trade policies. The anticipation of these tariffs, coupled with the Federal Reserve's indications of a slower pace of rate cuts, contributed to market fluctuations. Analysts noted that while the dollar's recent strength was driven by rising Treasury yields, there was caution due to unpredictable policy implementations.

Commodities
Commodity markets faced challenges in December 2024, particularly due to the strengthening U.S. dollar, which made dollar-denominated commodities more expensive for holders of other currencies. Oil prices saw slight increases, while gold remained stable, pressured by higher yields and the robust dollar. The dollar's appreciation was influenced by expectations of a major shift in U.S. trade policy, leading to substantial fluctuations over the course of the year.

Cryptocurrencies

Cryptocurrency markets in December 2024 were characterized by heightened volatility. Bitcoin, for instance, traded between an intraday high of $101,466 and a low of $95,249, reflecting significant price swings. The broader crypto market was influenced by global economic uncertainties and regulatory developments, which affected investor sentiment and market dynamics.

December proved to be an outstanding month for our trading signals, achieving a positive return of 27.29% with a maximum drawdown of 9.68%. This marked a significant improvement following November's weaker performance. The heightened volatility enabled our analysts to pinpoint trade setups with excellent risk/reward ratios. The favorable price movements allowed several trade ideas to hit their first and second targets throughout the month. These conditions have been advantageous for our strategy, and we anticipate that this momentum will serve as a strong foundation for 2025, allowing us to continue delivering high-quality results for traders.

The simulated performance statistics provided are based on the assumption of risking 1% of trading capital per trade. It is crucial to understand that past performance, whether actual or simulated, is not indicative of future results. 

12 month simulated performance statistics

Asset Class Performance

Commodities delivered the strongest performance this quarter with a return of 9.94%, the highest win rate of 59.32%, and a moderate drawdown of -6.21%. Indices followed closely, posting an 8.43% return, a solid win rate of 52.38%, and the lowest drawdown among all asset classes at -4.19%. FX Majors also performed well, achieving a 6.71% return with a win rate of 51.72% and a drawdown of -4.90%.

FX Crosses, while generating a 2.66% return, faced a lower win rate of 47.73% and a larger drawdown of -7.93%. Cryptocurrencies underperformed this quarter, delivering a negative return of -0.45% with the lowest win rate of 41.18% and a significant drawdown of -7.61%.

Overall, Commodities and Indices led the month with strong returns and consistent performance, while Cryptocurrencies faced the most challenges with negative returns and higher drawdowns.

The chart below highlights the contrasting conditions between the S&P 500 (Blue) and the Crypto 10 Index (Black). Both markets faced tough conditions in December. The sharp drop in the S&P 500 deviated from recent trends, revealing some market fragility and the influence of the Federal Reserve's 2025 projections. Similarly, the crypto market, which had a strong 2024 like the US indices, encountered difficulties. The mix of profit-taking and concerns about the 2025 outlook heightened volatility across global markets. While we successfully navigated the indices and FX markets, we struggled to achieve comparable returns in the crypto sector.

Best/Worst Performing Markets

Brent delivered the highest return at 8.55%, with an exceptional win rate of 88.89% across nine trades, evenly split between long and short positions, while maintaining a low drawdown of -1.01%. WTI followed closely with a return of 7.19%, the same win rate of 88.89%, and a matching drawdown of -1.01% across a similar trade distribution. The S&P 500 achieved a 5.04% return with a win rate of 62.50%, a balanced mix of long and short trades, and a slightly higher drawdown of -1.50%.

Overall, Brent led in terms of returns and consistency, while WTI mirrored its performance closely. The S&P 500 delivered solid returns with a moderate win rate and slightly increased risk exposure.

In our recent analysis, three assets underperformed: PALLADIUM, GBPNZD, and GBPUSD. Palladium recorded the lowest return at -5.00%, with a win rate of 33.33% and an equally high drawdown of -5.00%, indicating significant challenges in profitability despite a higher trade count of nine. GBPNZD followed with a return of -4.27%, a win rate of 16.67%, and a drawdown of -3.29%, with all six trades being short positions, reflecting poor performance in bearish strategies. GBPUSD posted a return of -3.50% with a win rate of 22.22% and a matching drawdown of -3.50%, showing difficulty in maintaining positive momentum across both long and short trades.

Overall, these assets demonstrated low win rates, negative returns, and considerable drawdowns, emphasizing elevated risk and challenging market conditions.

Brent delivered the strongest performance with an 8.55% return and a win rate of 88.89%, benefiting from stable, range-bound conditions throughout December that allowed for effective long and short strategies. In contrast, GBPNZD underperformed with a -4.27% return and a low win rate of 16.67%. The pair's bullish trend persisted, while the analyst team's focus on a corrective move lower resulted in unsuccessful short trades, highlighting the risks of counter-trend strategies.

Major Macroeconomic Data

Here is a snapshot of how our trade ideas performed on the day of key macroeconomic data.

Non Farm Payrolls - 6th December 2024

The Non-Farm Payrolls report for December exceeded expectations, showing an actual figure of 227K compared to the forecast of 214K. This stronger data led to a significant rise in the US Dollar, which had previously appeared vulnerable and suggested a potential decline. This unexpected movement caught our analysts off guard, as they had predicted further dollar weakness. On the day of the report's release, we executed numerous trades, resulting in an overall outcome of -1.21%. Notably, our sell trade on GBPJPY and buy trade on NASDAQ were the only trade ideas to yield substantial returns, achieving a 1.90% and 0.92% gains respectively. 

US CPI (MoM) - 11th December 2024

The US CPI data aligned with expectations, leading to subdued movements in major markets. We observed a continuation of recent trends, resulting in stable and predictable conditions. Consequently, we achieved substantial gains across the board, leading to excellent overall returns. We secured major victories on EURAUD, WTI, ASX200, Brent, GBPAUD, USDCHF, AUDJPY, and GBPUSD.

US Interest Rate Decision - 18th December 2024

The US Interest Rate decision to cut by 25 basis points met expectations. However, the revised projections suggested a slower pace of cuts in 2025, unsettling the markets and causing a sharp rally in the Dollar Index along with a significant reversal in major stock market indices. This surge in volatility ultimately benefited us, resulting in a 4.19% return for the day. Despite a low overall win rate, we achieved substantial gains in the S&P 500, USDMZN, USDCHF, WTI, and Brent.

Trade of the Month

Our team of expert analysts performs daily market assessments to pinpoint high-quality trading opportunities. Each analyst offers a distinct perspective, utilising their extensive experience to generate accurate market predictions.

For December, our trade of the month focused on the S&P 500. Observing the indecision in price action as the index approached new highs, our analyst detected a slowdown in momentum, potentially creating an opportunity to counter the upward move. Anticipating a failure at the previous swing high, they used classical technical analysis to determine precise entry and exit points. This strategic approach highlights our team's ability to foresee potential market reversals, which, while risky, can yield substantial rewards when successful.

S&P 500 - 18th December 2024

• Direction: Sell
• Entry Level: 6081
• Stop: 6117
• Target 1: 5940
• Target 2: 5877
• Risk/Reward: 1 : 3.92

The setup

• Posted Mixed Daily results for the last 9 days

• RSI (relative strength indicator) is flat and reading close to 50 (mid-point) highlighting the fact that we are non- trending

• Bespoke support is located at 5877

• Economic figures could adversely affect the short term technical picture

• Selling spikes offers good risk/reward

Here's a graphical depiction illustrating the trade setup and the analytical process behind the S&P 500.

The Outcome

The S&P 500 hit our targeted entry level at 10:14 (UK) with a drawdown of 12.38 pips. The price quickly dropped from the high of 6093.

The selling intensified significantly following the interest rate announcement and persisted until the US market closed at 21:00 (UK). This sharp downturn drove the S&P 500 to hit our initial target of 5940 at 20:34 (UK), with the decline continuing to reach our second target of 5877.

Following the release of the US interest rate decision, there was a significant downward movement in the major US indices, with the price of the S&P 500 dropping to a low of 5854 at 21:06, surpassing our second target of 5877.

Published: 09:55 UK (18th December 2024)

Triggered at: 10:14 UK (18th December 2024)

Exit at: 20:34 UK (18th December 2024)

Duration: 8 Hours and 33 minutes

Outcome: 3.92R

December 2024 presented a dynamic trading environment characterised by notable currency strength, market volatility, and mixed performance across commodities and cryptocurrencies. The U.S. dollar's rally, equity market fluctuations, and a strong performance in select commodities shaped the month's outcomes. Our trading signals delivered a positive return of 27.29% despite challenges in the crypto sector and selective underperformance in certain assets.

Key macroeconomic events, including Non-Farm Payrolls, US CPI data, and interest rate decisions, played a pivotal role in shaping market sentiment and price action. While some assets outperformed with strong returns and consistency, others faced headwinds amid shifting economic expectations.

Looking ahead, the momentum established in December, particularly in the commodities and indices sectors, provides a strong foundation for 2025. Our commitment to precise market analysis and risk management strategies will continue to support traders in navigating evolving market conditions effectively.

Thank you for your continued trust in Acuity Trading. Stay tuned for more updates and insights in the coming months.