Happy New Year!!!
We hope that everyone had a great holiday season and was able to enjoy time with family and friends.
The stock market posted another solid year in 2024 fueled by excitement over artificial intelligence enhancements and continued resilience by the US Economy. Domestic stocks led the way with a return of +25.0% due to a heavy concentration in the “Magnificent Seven” 1 which amounted to a staggering +55% of the total return of the index. 2 Next in line was small cap stocks which returned +11.5% for the year, followed by international stocks at +4.3% and bonds which finished up slightly positive at +1.3%. 3
The fourth quarter did not contribute much to these returns as we saw mixed performance across asset classes. Domestic stocks (+2.4%) and small cap stocks (+0.3%) finished the quarter positively while international stocks (-8.1%) and bonds (-3.1%) struggled.3 International declines were led by weakening European economic activity and slowing earnings. Meanwhile, bond yields surprisingly rallied (causing prices to drop) due to Federal Reserve guidance at their December meeting. Specifically, the Federal Reserve acknowledged a more uncertain inflation outlook and updated their projections to reflect two rate cuts in 2025 down from the four cuts they projected in September.
As we look ahead to 2025, the economy enters the year on solid footing as the unemployment rate sits at 4.1% and US Payrolls grew by 256,000 jobs in December.4 Unfortunately, inflation continues to sit at +2.7%, which continues to linger above the Federal Reserve’s +2.0% target. Political changes will also shape the economic landscape in 2025 as Donald Trump returns to the White House following a Republican sweep of the House and Senate. With Republicans now controlling Congress, discussions around fiscal policy, deregulation, immigration and trade have intensified. Markets are closely watching the potential implementation of tariffs, which could create ripple effects for supply chains, corporate earnings, and global trade. We expect market volatility to increase as a result.
While short-term fluctuations and policy uncertainties are inevitable, our long-term outlook remains constructive. Diversification and discipline continue to be the cornerstones of successful portfolio management, and we are here to guide you through any uncertainties.
1Magnificent Seven – AAPL, AMZN, GOOG, GOOGL, META, MSFT, NVDA and TSLA
2https://am.jpmorgan.com/us/en/asset-management/adv/insights/market-insights/guide-to-the-markets/
3Market segment (index representation) as follows: Domestic Large Company Stocks (S&P 500), Domestic Small Company Stocks (Russell 2000) International Stocks (MSCI EAFE) Domestic Bonds (Bloomberg Barclays US Aggregate Bond Index) Growth Stocks (Russell 1000 Growth) Value Stocks (Russell 1000 Value)
4https://www.cnbc.com/2025/01/10/jobs-report-december-2024.html