U.S. equities had a stellar year, with the Dow rising 13%, S&P 500 rising 23% and Nasdaq up 29%, all achieving multiple all-time highs. This exceptional performance was partially propelled by the "Magnificent Seven" stocks—Apple, Tesla, Alphabet, Amazon, Microsoft, Meta Platforms, and Nvidia—which experienced remarkable growth. Apple, in particular, approached a market capitalization of $4 trillion, solidifying the dominance of technology firms.

International markets on the contrary presented a mixed picture:

• European equities underperformed the US, weighed down by economic challenges and currency depreciation.
• China’s equity markets faced significant volatility but its benchmark index ended 2024 up 14.5% due to a combination of policy support, economic recovery, and investor sentiment.

The bond market faced headwinds from inflationary pressures and fewer-than-expected rate cuts by central banks.

• The Federal Reserve reduced the federal funds rate by 100 basis points, ending the year at 4.25%–4.50% to support economic growth as inflation eased.
• 2-year yields declined from over 5% in April to 4.25% by December, while the 10-year Treasury yield stabilized around 4.5%, providing attractive returns for long-term investors. The 30-year yield rose to 4.785%
• The U.S. Treasury yield curve remained inverted for much of the year, signaling persistent recession concerns. However, by Q3, the curve began to flatten, hinting at cautious optimism for a potential "soft landing.”

• Energy: crude oil prices ended the year around $75, down about 4.3% on the year.  Reasons for the decline include concerns about economic slowdowns in China that dampened demand for oil and gas and uncertainty surrounding OPEC+ production decisions.
• Gold: Prices rose materially over the year, ending December at ~$2,606/oz, up about 30% from $2,026 at the start of the year as investors sought a hedge against market volatility and inflation.
• Agriculture: Grain prices fluctuated due to weather disruptions and geopolitical instability, and in general reduced government support and elevated production expenses have left farmers in more of a difficult financial position.

• U.S. Economy: GDP grew by about 3.1% for the year, driven by consumer resilience and government infrastructure spending. However, rising borrowing costs slowed housing and corporate investments.
• Labor Market: Unemployment remained steady at around 4.2%, while slower wage growth helped ease inflationary pressures.
• Global Growth: The IMF projected global GDP growth at 3.0%, with robust recoveries in India and Southeast Asia offsetting slowdowns in China and Europe.

Looking ahead, the global economic landscape remains complex. Equity markets have shown resilience, but challenges such as inflation, potential policy shifts under the new administration, and geopolitical uncertainties persist. Diversification and staying informed will be critical for investors in 2025.

The IRS announced adjustments to retirement contribution limits for 2025:

• 401(k) Plans: The employee contribution limit increased to $23,500, up from $23,000 in 2024. Individuals aged 50-59 or 64-plus can make additional catch-up contributions of $7,500. New in 2025, if you are ages 60 to 63, the catch-up contribution limit increases to $11,250.
• Individual Retirement Accounts (IRAs): The contribution limit remains at $7,000. The catch-up contribution limit for individuals aged 50 and over remains at $1,000, enabling a total contribution of $8,000.

These adjustments aim to encourage increased retirement savings, providing individuals with enhanced opportunities to bolster their financial security for the future.

In summary, 2024 was marked by significant growth in equity markets driven by strong corporate profits, easing monetary policy, and artificial intelligence investment. Staying informed and adaptable remains crucial as we transition into 2025.

Some of the key market risks being considered by market pros are:

Inflation: “throughout history inflationary cycles tend to have multiple peaks” -Marci McGregor, BofA Merrill Lynch

Supply-side hiccups: “much of the US economic momentum is due to strength on the supply-side, especially labor.  With tighter (immigration) policy, that dynamic can get disrupted” - Josh Hirt, Vanguard

Rise in valuations: “The thing to watch out for in the new year is that [valuations] are priced for perfection, any deviation from perfection is going to result in some pretty heavy negative marks.”- Matt Rowe, Nomura Capital Management. “

Washington policy uncertainty: “How [Trump’s] policies are executed will be very important for near-term growth” - Seth Meyer, Janus Henderson Investors.

As we look ahead, sustaining the growth achieved in 2024 will rely on economic data and earnings performance beyond mere Fed policy shifts.  It's crucial to closely monitor these indicators to gauge the market's resilience.  We encourage investors to remain informed, maintain an appropriate risk profile, and closely observe market trends while being mindful of potential risks amidst the prevailing optimism.  Our commitment lies in guiding investors through potential challenges, supporting a long-term investment approach, and remaining attentive to market developments.

US Consumer Sentiment, as measured by the University of Michigan’s Index, maintained its upward momentum for the sixth straight month: rising a not-insignificant 2.2 index points to 74.0, its largest M-o-M gain since January.  Broadly speaking, consumers believe that the economy has improved considerably as inflation has slowed.  Consumers still are a ways away from thriving, as the index is currently midway between its June 2022 low and pre-pandemic euphoria.

Indices:  Once again and similar to 2024, the large cap index quadrants and the growth index quadrants outperformed the rest of the market. Led by the Magnificent Seven (which are large-cap growth names), the upper right indices all grew over 20% on the year.  Laggards were Small-Cap Value and Blends.

Sectors: On the year, all sectors ended up in the black, even taking into account the year-end declines. 2024’s top performing sector is Communications Services, up 34.7%, mainly due to key sector companies such as Alphabet (GOOG +35%), Meta (FB +65%) and Netflix (NFLX +83%).  Other leading sectors were Financials (which benefitted from the strong economy and that banks do well when short term rates fall and long term rates remain steady because their Net Interest Margin grows - the spread between what banks charge on loans vs what they pay on deposits), and Consumer Discretionary on the back of names such as Tesla (TSLA +62%) and Amazon (AMZN+44%).   The Materials and Healthcare sectors lagged the market, although they ended up slightly in the black on the year.

What did the big-bank financial analysts predict?  What are their expectations for 2025?
Nobody of course can predict the future, but here we share “expert” analyst predictions for 2025 and show how the same analysts performed in 2024.  On average, analysts missed their 2024 market expectation by 21%, expecting the markets to perform much worse than they actually did.  In fact, the big-name economic analysts have been wrong by about 20% on average each year for the past 4 straight years.

As 2024 closes, we look back at the analyst market predictions at the beginning of the year.  One year ago, major Wall Street equity analysts, on average, predicted the S&P 500 index would finish 2024 at 4880.  This turned out to be way off base: the index closed the year at 5,882 - higher by 21% than average expectations!  Remember — these are very highly compensated financial analysts, and predicting the markets is their full-time profession.  This proves, once again, that nobody can accurately predict the markets all the time.

Predictions for 2025 are currently rolling in, and the survey of the same Wall Street prognosticators pegged the S&P index to be at 6627 at year-end 2025 (an advance of 12.7%), which… is nice.   And that’s all it is because there is no evidence that anyone can predict the market’s movements reliably.

We are committed to monitoring the markets and all situations that impact your retirement portfolio.

Volatility, regardless of the cause, can be unnerving, even if it is not atypical.  We help you navigate ever-changing market environments, focusing on ensuring continued progress achieving your long-term investment goals.