Last Updated on February 19, 2025
Overview
2024 was, like the years before it, another eventful year when viewed through an investment/financial lens. Whether the events that transpired were a continuation of things that happened before or occurred for the first time, there is once again an abundance of lessons to extract.
Let’s review some of the major investment-related events that occurred and what investors can hope to learn from them.
Renewed Pushback Against Environmental Initiatives
Climate change and its related initiatives have, for the past several years, been a hotly contested topic. In response to societal and investor pressure, many companies across various industries have implemented all sorts of initiatives with varying degrees of success and commitment.
We discussed this pressure to pursue climate-related initiatives in our 2021 recap, whereby we focused primarily on oil and gas companies and how they responded.
However, in 2024 the tone has changed from one that’s embracing climate initiatives to a more resistive, if not hostile, one. ExxonMobil CEO Darren Woods has expressed his disagreement with climate goals and instead is turning Exxon’s attention and resources towards more oil and gas extraction. Saudi Aramco CEO Amin Nasser shares similar sentiments, calling for more investment in oil and gas instead of phasing them out.
This back and forth between committing to certain initiatives in one breath and swiftly backtracking them in another is a reminder to investors about some things.
First, just because companies implement certain initiatives doesn’t necessarily mean they’re fully committed to them. Such initiatives can be created simply to placate a certain group to prevent any further uproar, and can easily be repealed later once that rowdy group has quieted down or lost influence.
This can cut both ways: initiatives that certain investors disagree with may be repealed in the future, but initiatives they support may also suffer the same fate.
Second, even if companies are genuinely trying to support certain initiatives and do their best to keep them active, external factors may cause them to be cancelled or drastically scaled back lest they suffer potentially severe consequences. These external factors can include economic developments, political pressure, or one of many other examples.
In 2024, not only did some oil and gas companies backtrack on their climate goals but so did some of the world’s largest banks. In December 2024, six of the largest US banks withdrew from the Net Zero Banking Alliance (NZBA) and were soon followed by five of Canada’s largest banks.
Though these banks didn’t release any official reasons for their departure, some pundits speculated that they did so in preparation for Donald Trump’s incoming presidency to avoid his or his political allies’ potential ire due to their staunch anti-climate stance.
So, anytime a company announces initiatives, it would be unwise to celebrate (or groan) too soon.
Toronto-Dominion Bank’s Oversight Failure and Their Lasting Consequences
Despite robust, promising growth in preceding years, 2024 proved to be a very challenging one for Toronto-Dominion Bank (TD). It started in May 2024, when it was first reported that the US Department of Justice launched an investigation against TD for potential money laundering charges after discovering evidence of such activities taking place in their New York and New Jersey branches.
This investigation eventually led to TD pleading guilty to the money laundering charges, resulting in a US$3.1 billion fine. To make matters worse, not only was TD slapped with a hefty fine, but they were also sanctioned by US law enforcement, limiting the expansion of its retail banking business in the country thereby casting further doubts on its US growth prospects.
To say that 2024 was a rough year for TD is putting it lightly.
How this money laundering ordeal unfolded, became an expensive mess, and its aftermath provides many key lessons for investors.
Although it’s hard to say for certain, it can be argued that this entire ordeal wouldn’t have been as severe, or may not have happened at all, had TD not been complacent with its regulatory compliance. Some people view regulatory compliance as an unnecessary, expensive burden, but regulatory complacency will always catch up to those who refuse to do anything about it.
TD paid a US$3.1 billion fine, took a hit to its business reputation, and faces murky growth prospects to discover what happens when its complacency goes unchecked.
Most companies proudly say they adhere to all pertinent laws/regulations they’re subject to, but finding out if they’re serious about it is difficult for most investors to do. If a company suffers a one-off event of regulatory non-compliance, then investors don’t have to worry too much, but if non-compliance is a recurring issue, then investors will want to pay close attention to what’s going on.
TD’s robust, steady growth in previous years to suddenly having doubts about its ability to achieve meaningful growth is also a clear demonstration that investment merit can quickly change due to a handful of highly impactful events.
Investors can do everything right when assessing prospective investments, performing in-depth analysis, and implementing proper risk management, but sometimes all it takes is one major event (or series of events) to turn everything upside down.
This sort of risk, the type that falls well beyond an investor’s locus of control, is one of the most frustrating to deal with because there’s very little that can be done about it. TD’s money laundering ordeal and its fallout is a stark reminder of this type of risk investors will always have to deal with.
Fears of a Potential, Unconfirmed Economic Slowdown Can Easily Rattle Financial Markets
If there’s one sin financial markets are consistently guilty of committing, it’s overreacting to bad news, and proceeding to think of all kinds of doomsday scenarios because of it.
In all of our previous investment lesson articles, without fail, one of the major events that happened in a given year was market overreaction. Whether it was during the COVID era, the onset of the Ukraine-Russia war, or the constant talk of inflation-induced recessions that would happen at any time, any sort of bad news was enough to throw financial markets into disarray.
2024 was, unfortunately, no different.
In early August 2024 [1, 2, 3], the Dow Jones plunged more than 1,000 points (a 2.6% decrease), while Japan’s Nikkei 225 dropped by 12.4%, representing its steepest drop since the infamous Black Monday of 1987. What drove all of this? Weaker-than-expected US economic data stoked fears of a slowdown in the US economy and, by extension, many economies around the world. Canada’s TSX also experienced a similar, albeit less dramatic, drop.
Financial markets recovered more or less from these declines in the following days.
Overreacting to bad news and thinking about all kinds of hypothetical, adverse outcomes is a tale as old as time in investing, and it happens almost every year like clockwork.
August 2024’s mayhem is yet another reminder, among countless in the past, that panicking due to unsavoury news is one of the fastest ways to make terrible investment decisions. Financial markets can post steep losses one day and then quickly recover them in a few days: investors who keep this in mind can spare themselves the trouble of making emotionally driven decisions.
The Aftermath of a Tumultuous US Election
One of the most widely anticipated events, if not the most widely anticipated, in 2024 was arguably the US presidential election.
All sorts of groups from around the world closely follow the US presidential election every time it comes around, and one of those groups is investors. Given the US’ economic size, influence, and world-renowned financial markets, this is hardly a surprise.
Because the president can set the tone of America’s economic direction and related policies that, for better or for worse, can have global implications, it’s understandable for investors around the world to best understand what each candidate has to say about these matters.
Following the re-election of Donald Trump, US financial markets immediately jumped the next day [1, 2], along with bitcoin reaching record highs, and is anticipated to reach new highs in the future [1].
A few weeks after the election, Trump’s rhetoric about tariffs started to pick up once again, with markets around the world reacting to his comments differently [1, 2, 3]. Only time will tell to see how his tariff threats unfold in the future (which we will discuss in our 2025 recap).
In the words of Benjamin Graham: “In the short term, the markets are a voting machine, in the long term, they are a weighing machine”. Following the 2024 US election, these words once again proved to be true.
Financial markets were quick to react to the outcome based on nothing more than optimism that Donald Trump might be good for the US economy. Markets were also quick to react to tariff threats even if they hadn’t been enforced yet.
Investors have a nasty habit of setting wild expectations and imagining all sorts of hypothetical outcomes following an election, especially when their “preferred” candidate wins. This election-induced market euphoria clearly demonstrates to investors just how emotionally driven markets can be in the near term, even if that excitement is based on nothing more than expectation and optimism.
Wrapping Up
2024 was once again a busy year, and amidst this flurry of activity lay a gold mine of valuable investment lessons.
Renewed pushback against climate-related initiatives, continued economic uncertainty, and the aftermath of a chaotic US election gave investors a lot to digest but also presented a multitude of lessons to learn.
Following the re-election of Donald Trump, one of the major things investors will want to keep an eye on going forward is how the world reacts to America’s new economic policies and constant tariff threats, and how global economies and financial markets will be affected by them.
