Quarterly Market Update 12.31.2024
Wow, what a crazy quarter! Stock markets tend to be volatile in September and October, then do well in November and December ending up the year with a strong finish. But not this past quarter. Stock markets performed very well in September and October, but since the election markets have been very volatile and the traditional Santa Claus rally never appeared.
The U.S. stock market was up 2.69% for the fourth quarter of 2024 and up 23.91% for the year. Another fantastic year for U.S. stocks! The U.S. stock market was up over 26% in 2023.
The U.S. bond market produced negative returns across the board in the fourth quarter of 2024 as yields rose. Short term bonds produced returns of 4.61% for 2024. Intermediate term bonds produced returns of 4.05% and long term bonds returned 7.13% for 2024.
Several issues contributed to the volatility in stocks in the fourth quarter:
First, rising yields in the bond market.
Next, inflation. At the last Fed meeting in December, Fed chair Powell announced that he sees fewer interest rate cuts in 2025, due to lingering inflation, however, it is in check.
Then, investors selling winners. For whatever reason, stocks with the biggest returns gave back some of their huge gains for the year in December.
Finally, the ever-present fear the economy will slow into recession. There are no signs now, nor have there been any in the past. Key economic indicators including employment are holding steady although the numbers are constantly revised downward the economy is not heading into a recession.
The outlook for the first quarter is positive, both from a seasonal and a current perspective. The stock market is ultimately driven by corporate profits or earnings. Seasonally the fourth and first quarters are good for the stock market. Most companies produce the bulk of their profits this time of year. The outlook for corporate earnings for the fourth quarter 2024 and first quarter 2025 are positive. Consumer spending which drives our economy and corporate profits is strong.
The Trump administration promises to put forth business friendly policies which drive growth. He also promises to reduce corporate taxes which directly reduces the corporate bottom line which increases earnings. President Trump’s approval of crypto has given investors confidence and boosted investment, although most investors still don’t understand what it is or how it works.
Regarding the Federal debt - it is still out of control at $35 trillion. The outgoing administration added more to the debt than any administration in history. It is imperative the debt be dealt with. I am very interested in D.O.G.E. (Department of Government Efficiency) It is a very different and positive message coming from Washington D.C. and is, at least, a start and steps in the right direction. I, for one, believe Elon Musk is one of the most intelligent people on the planet and think his ideas can only help address the mountain of federal debt.
Please reach out if you have any questions or need help.
