Global equities experienced mixed performance in Q4 2024 amid heightened volatility. The quarter started with strong gains following the U.S. presidential election, as investor optimism drove major indices to record highs. However, this momentum was tempered in December by rising Treasury yields and concerns about inflationary pressures from anticipated fiscal policies. The S&P 500 ended the quarter up 2.4%, contributing to a robust 25% gain for the year. Large-cap growth stocks, particularly in the technology sector, continued to outperform, fueled by advancements in artificial intelligence and strong corporate earnings. 

In contrast, international equities struggled. The MSCI EAFE Index, representing developed markets outside the U.S. and Canada, declined -8.1% as a stronger U.S. dollar and geopolitical uncertainties weighed on sentiment. The MSCI Emerging Markets Index also declined -8%, with concerns over U.S. trade policy and global economic deceleration leading to broad weakness across emerging economies.

Bond markets faced headwinds due to rising yields. The Bloomberg U.S. Aggregate Bond Index declined -3.1% for the quarter, bringing its annual return to 1.25%. The 10-year U.S. Treasury yield climbed 80 basis points, ending the year at 4.6%, as markets adjusted to expectations of sustained economic resilience and limited Federal Reserve rate cuts in 2025. Despite the Fed implementing two 25 basis point rate cuts during the quarter, investor sentiment remained cautious, particularly in fixed income markets. High-yield bonds fared slightly better, with the Bloomberg U.S. Corporate High Yield Index posting a modest gain of 0.2% in Q4, contributing to a full-year return of 8.2%.

Commodities saw mixed results. The Bloomberg Commodity Index edged down -0.5% for the quarter. Energy markets remained volatile, with crude oil prices rebounding toward year-end due to declining U.S. crude stockpiles and the potential for tighter global supply amid geopolitical risks. In contrast, gold posted strong gains in Q4, benefiting from increased central bank purchases, heightened geopolitical uncertainty, and strong investor demand for safe-haven assets.

As of December 31, 2024, OCERS’ portfolio had a market value of $24.3 billion, down from $24.5 billion at the end of the third quarter. OCERS’ portfolio generated a quarterly return of -0.8% relative to the policy benchmark return of -0.5%.