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Markets limped into year-end but still closed out 2024 with solid performance. The S&P 500 finishing over 20% in back-to-back years has only occurred a few times since 1950. The other occasions were 1954-1955 and 1995-1998. That capped four straight years of +20% performance with 1999 falling just short of +20%. December weathered a significant pullback post the November election upward market burst. The hardest hit sectors in December were Materials (-11.4%), Energy (-11.2%), with both Real Estate and Utilities down -10%. Winning sectors for the month were Communication Services (+5.5%), Technology (+3.4%) and Consumer Discretionary (+3.3%). The Magnificent Seven once again drove market performance for the year. The Utilities sector benefitted from the rising demand for electricity relating to AI demand. S&P 500: Dec -2.50% 2024 +23.31% Sector Performance 2024: Communication Services +39.7% Current U.S. Treasury Yields: 6 Month Bill 4.25% The Fed, the Economy and the Markets: Fed Chair Powell did cut rates 25bps at the December meeting and gave hawkish commentary around the move. The Fed may pause rate cuts if the economy remains near full employment and the consumer continues to be resilient. Headline inflation printed at 2.7% in November, with core inflation at 3.3% and above the Fed’s target of 2%. Inflation is still sticky. The market is looking for a minimum of two rate cuts for 2025. The current Fed Funds Rate is 4.33%, down from 5.33% in August 2023. The economy grew in 2024. GDP increased 2.9% YOY. Consumer spending remained elevated. Housing activity picked up over 2023 with the 30-year mortgage rate ending 2024 at 6.95%. The unemployment rate ended the year 0.5% higher than 2023 at 4.2%. Energy prices declined helping to offset some of the increases in food and shelter. The stock market posted strong gains the past two years and this leads to speculation of what will follow. Expectations circulating Wall Street have varied views. The street visualizes the S&P 500 delivering 2025 results within a range of 6,000 to 7,100, a 2%-11% gain projection. Our response is that the outlook for 2025 is uncertain. There are a broad range of issues buried in these assumptions; Earnings results (which for Q1 should be good-excellent), Federal Reserve rate cuts and attendant interest rates, tax adjustments, impact on inflation, employment/unemployment data, global news on everything from tariffs, wars and the economies of China, Japan, EU (inflation at 2.4%), UK and Germany (inflation at 2.8%). Investing is uncertain and always subject to future events impacting both equities and fixed income. GN&Co has a long history of managing a wide circle of family and client assets successfully for years. Our formula is designed to adjust investments in portfolios in response to changes in corporate earnings and shifts in economic data. We begin 2025 as usual, in a cautious and prepared fashion, ready to adapt to changing circumstances. We expect another good year with positive performance. |
