I. Introduction: Unpacking Mercer’s Annual Investment Roadmap
Mercer’s “Periodic Table of Index Returns” stands as a keenly awaited annual publication within the investment community. It offers a clear, visually engaging, and statistically robust summary of how various global asset classes have performed over the preceding year. For investors, this table serves as a valuable tool not only for understanding the often-complex dynamics of financial markets but also for prompting reflection on their own investment strategies and allocations. It distills a year of market movements into a digestible format, highlighting the winners, the losers, and the often-surprising shifts in fortune across the investment landscape.
This analysis dissects the findings from Mercer’s latest table, which encapsulates the full calendar year 2024, based on their comprehensive review published in early 2025. While the patterns of the past are not definitive predictors of future outcomes – a point Mercer itself underscores – a thorough understanding of these trends is indispensable for informed financial planning and strategic decision-making. The true utility of reviewing this historical performance data lies not in attempting to forecast the next market leader, but in gleaning strategic lessons about market behavior, the impact of economic forces, and the enduring principles of sound investment management.
II. 2024 Asset Class Scorecard: A Tale of Divergence and Dominance
The investment landscape in 2024 was characterized by significant divergence in asset class performance, with equities leading the charge while certain other sectors faced headwinds.
A. The Reign of Equities
Global equities, when left unhedged, emerged as the undisputed champion for Australian investors in 2024, delivering a remarkable 31% return. This stellar performance was not solely a function of rising stock prices; it was significantly amplified by currency movements. Specifically, the depreciation of the Australian dollar against the US dollar provided a substantial tailwind for returns on unhedged international assets.
To illustrate the magnitude of this currency effect, Global Equities (hedged) – where currency risk is mitigated – returned a still robust 23%. The 8 percentage point difference between the unhedged and hedged figures underscores that currency exposure was a major determinant of outcomes for Australian investors with global portfolios in 2024. This variance highlights that the decision to hedge or not hedge currency exposure is an active investment choice with potentially material consequences, rather than a passive afterthought. For those who remained unhedged, it was effectively a beneficial position on a weaker Australian dollar or stronger US dollar, which paid off handsomely during the period.
The strength in equities was not confined to a single strategy. US Equities also posted strong gains of 25%, while Emerging Market Equity delivered a healthy 18%. This indicates a broad-based rally, though with clear regional leadership. Australian Equities, while providing a positive return of 11%, noticeably lagged their global and US counterparts. This relative underperformance of the domestic market serves as a pertinent reminder of the benefits of global diversification, as concentrating solely on home-country assets would have meant missing out on more substantial gains available internationally in 2024.
B. The Property Conundrum
In stark contrast to the ebullience in equity markets, Australian Direct Property emerged as the notable underperformer in 2024. This asset class recorded a negative return of -6%. Mercer attributes this decline to “lagged valuations” , a characteristic often associated with unlisted assets like direct property. Valuations in direct property are typically determined by periodic appraisals rather than continuous market trading, meaning that changes in underlying market conditions can take time to be fully reflected in reported asset values.
This “lagged valuation” dynamic suggests that the reported -6% may not yet capture the full extent of market shifts that occurred during 2024, potentially indicating scope for further adjustments or a more delayed recovery compared to assets traded on liquid exchanges. It also highlights a key distinction between unlisted and listed property investments. Global Listed Property, for instance, managed a positive return of 4% in 2024. This divergence likely reflects the faster price discovery and greater liquidity inherent in listed markets, which can react more swiftly to changing investor sentiment and economic data.
C. Performance Across the Spectrum (Summary Table)
To provide a comprehensive overview of the varied performance across major asset classes in 2024, the following table summarizes Mercer’s findings:
Mercer’s 2024 Asset Class Performance Snapshot
| Asset Class | 2024 Return (%) |
|---|---|
| Global Equities (unhedged) | 31% |
| US Equities | 25% |
| Global Equities (hedged) | 23% |
| Emerging Market Equity | 18% |
| Global Listed Infrastructure | 13% |
| Australian Equities | 11% |
| Hedge Funds | 9% |
| Cash | 4.5% |
| Global Listed Property | 4% |
| Australian Bonds | 3% |
| Australian Direct Property | -6% |
Data source:
This snapshot clearly illustrates the wide dispersion of returns and sets the stage for a deeper examination of the underlying themes that shaped the 2024 investment year.
III. Decoding 2024: The Key Themes That Drove Returns
Several interconnected themes were pivotal in shaping the asset class returns observed in 2024, ranging from macroeconomic policy shifts to specific sectoral and technological trends.
A. The Unstoppable Equity Engine & The “Magnificent 7”
The “impressive performance” of global equity markets was a dominant narrative in 2024. This strength was underpinned by a confluence of factors, including a “cautious economic recovery, technological progress (especially in AI, cloud computing, and digital transformation), and a more ‘dovish’ stance from central banks”. The anticipation, or early signs, of central banks potentially pivoting away from aggressive monetary tightening towards a more accommodative policy provided a significant boost to investor sentiment. Such a “dovish stance” generally implies lower interest rates or an end to rate hikes, which can reduce borrowing costs for companies, stimulate economic activity, and make equities relatively more attractive compared to fixed-income investments by lowering the discount rate applied to future corporate earnings. Thus, market performance in 2024 was heavily influenced by these macroeconomic policy signals and expectations, not solely by company fundamentals.
A critical element within this equity surge was the “dominance of the ‘Magnificent 7’ technology stocks in the US,” which Mercer identified as a “significant factor”. The outsized performance of these few large-cap technology companies (Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia, and Tesla) meant they contributed disproportionately to overall index returns. While this concentration was highly beneficial for market performance in 2024, it also implies a heightened degree of market concentration risk. Investors relying on broad market exchange-traded funds (ETFs) or index funds found their returns heavily skewed by these select names, effectively making a concentrated bet on Big Tech. This highlights a potential vulnerability should the fortunes of these specific companies falter in the future.
B. Currency’s Decisive Hand
As previously touched upon, “currency movements significantly influenced the returns of overseas assets for domestic investors” in 2024. The striking difference between the 31% return from unhedged global equities and the 23% from hedged global equities serves as a powerful illustration. The decline in the Australian dollar against the US dollar was the primary driver of this gap, effectively adding an 8 percentage point premium to unhedged international equity investments for Australian investors. This underscores that currency exposure is not a passive element but an active risk and return factor that requires careful consideration in portfolio construction, particularly in periods of notable foreign exchange volatility.
C. Fixed Income’s Revival and Cash’s Steady Appeal
After a challenging period for fixed income, 2024 witnessed a “resurgence” in these markets, with Australian Bonds delivering a “respectable 3%” return. More strikingly, Cash also provided a “solid return of 4.5%” , notably outperforming Australian Bonds. This scenario, where ultra-low-risk cash yields more than typically lower-risk bonds, is somewhat unusual. Traditionally, investors expect a term premium for committing capital to bonds for longer periods.
The outperformance of cash over bonds in 2024 likely reflects the high prevailing short-term interest rates, which directly boosted returns on cash deposits, while existing bonds with lower coupons may have still been impacted by capital adjustments from prior rate hikes, or longer-term yields did not rise as sharply as short-term rates. This dynamic can challenge traditional asset allocation assumptions, particularly in certain interest rate environments, prompting investors to question the relative attractiveness of bonds if cash offers competitive or even superior risk-adjusted returns, at least in the short term.
D. Property’s Patchwork: A Story of Two Markets
The overall negative return for Australian Direct Property masked significant underlying variations within the broader property sector. Challenges were particularly acute in the “office space segment due to the shift towards remote and hybrid work” patterns that have persisted and evolved post-pandemic. This structural change has led to increased vacancy rates and downward pressure on rents and valuations in many office markets.
However, not all property segments suffered. In contrast, “industrial and logistics sectors thrived” , driven by the continued growth of e-commerce, demand for modern warehousing, and resilient supply chains. This bifurcation within the property market is a clear example of how broad asset class labels can often hide significant performance variations at the sub-sector level. It underscores the necessity for investors to look beyond generalized asset class allocations and consider the specific drivers and outlook for different segments within those classes. This principle of sectoral divergence is not unique to property and applies across equities, fixed income, and other investment categories.
E. Bright Spots in Specific Regions and Defensive Plays
Beyond the major developed markets, 2024 also saw “robust” performance from Japanese equities, which benefited from corporate governance reforms and a weaker yen for much of the year. Emerging markets also presented pockets of strength, with “strong showings” particularly noted in India and Southeast Asia.
In terms of alternative strategies, “other defensive assets like hedge funds delivered a solid return of 9%”. This performance suggests that strategies designed to mitigate downside risk or capture alpha through non-traditional approaches played a valuable role in diversified portfolios during a year that, despite strong equity returns, was not without its underlying economic uncertainties.
IV. Mercer’s Compass: Navigating the Investment Maze
Beyond the raw performance data, Mercer’s analysis offers valuable guidance on how investors should interpret these results and approach future investment decisions.
A. The Perils of Chasing Yesterday’s Heroes
A core message from Mercer is the inherent “difficulty in identifying reliable themes or patterns from the Periodic Table” that will predict future winners. The firm explicitly reinforces that “the top performers in one year may not repeat their success in the next”. This presents an interesting paradox: the table itself clearly ranks past winners and losers, which might tempt investors to extrapolate these trends. However, Mercer’s caution against this very practice is central to understanding the table’s true utility. Its value lies not in providing a crystal ball for market timing, but in illustrating fundamental market characteristics such as volatility, the rotation of leadership among asset classes, and the enduring importance of diversification.
B. The Bedrock of Successful Investing
In light of market unpredictability, Mercer advises investors to “focus on structuring portfolios to withstand various market conditions with a long-term perspective rather than trying to predict short-term market movements”. This emphasizes a strategic, rather than tactical, approach to asset allocation. Furthermore, Mercer stresses the importance for individuals to “know their true time horizon, understand their risk tolerance, and utilize asset class diversification and patience to achieve long-term outcomes”. These principles – self-awareness, a long-term view, diversification, and discipline – form the bedrock of successful investing, irrespective of year-to-year market fluctuations.
C. Bracing for 2025: A Call for Prudence
Looking ahead, Mercer offers a cautious outlook, stating that they “anticipate heightened geopolitical and equity volatility in 2025, along with significant changes in US policy, making the short-term capital markets unpredictable”. This forecast for increased turbulence is significant. The geopolitical tensions and potential shifts in US policy could directly impact or even reverse some of the key drivers of 2024’s strong equity performance, such as the optimism surrounding a dovish central bank pivot or the continued dominance of US tech giants. For instance, significant policy changes in the US relating to fiscal spending, regulation, or trade could alter the investment landscape considerably, while escalating geopolitical events can disrupt economic recovery and sour investor sentiment. This outlook reinforces Mercer’s call for robust, diversified portfolios designed to weather uncertainty, rather than portfolios heavily reliant on the continuation of specific themes that prospered in 2024.
V. Conclusion: Key Takeaways for the Discerning Investor
The Mercer Periodic Table of Index Returns for 2024 paints a vivid picture of a year dominated by strong equity performance, particularly from unhedged global stocks buoyed by technological advancements, anticipation of shifting central bank policies, and favorable currency movements for Australian investors. Conversely, it was a challenging period for Australian direct property, which grappled with lagged valuations and structural shifts in demand. The year also served as a reminder of the role of fixed income in providing positive, albeit modest, returns and the appeal of cash in a higher interest rate environment.
The most critical takeaway, however, transcends the specific numbers of any single year. Mercer’s analysis consistently underscores the unpredictable nature of financial markets and the folly of attempting to chase last year’s winners. Instead, the enduring message for investors is the paramount importance of a disciplined, long-term strategy rooted in diversification, a clear understanding of one’s own risk tolerance and investment horizon, and the patience to stay the course through varying market cycles.
As investors digest the outcomes of 2024, the insights from Mercer’s review should be used not as a tool for forecasting 2025’s top performers, but as a catalyst for refining their own investment approaches. Given Mercer’s anticipation of heightened volatility and policy shifts in the year ahead , the emphasis should be on ensuring that portfolios are resilient, well-diversified, and genuinely aligned with long-term financial goals. This proactive stance—reviewing and reinforcing strategic allocations in anticipation of uncertain conditions—is likely to serve investors far better than reacting to short-term market noise.
Sources used in the report:
https://www.mercer.com/en-au/insights/investments/market-outlook-and-trends/annual-periodic-table-of-index-returns/?utm_source=mpower&utm_medium=email&utm_campaign=periodic-table-table-of-index-returns/#msdynmkt_trackingcontext=fe25c898-e0d4-4cb3-88e1-5c9cfdb40300
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