A Time for Reflection: Reviewing 2024 Performance

It is that time of the season where we tend to reflect on the year and give thanks for the time that we have been able to spend w/ our loved ones. It is also a perfect time to take stock (pun intended) in the significant performance of the markets over the past 11 months. The US stock market has experienced a remarkable year-to-date performance in 2024, defying expectations and marking a significant rebound from the previous year's volatility. As of this writing, the S&P 500 has surged by 27.33%, and the Nasdaq has gained by an even more impressive 33.07% throughout most of 2024. To carry this out a little further, since the end of 2022, the S&P 500 and Nasdaq have gained ~58% and ~91%, respectively. This robust growth is fueled by a combination of factors, including a resilient economy, easing inflation concerns, and positive corporate earnings.

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One of the key drivers behind this impressive performance is the Federal Reserve's proactive measures to combat inflation. We continue to believe that the FOMC was late to the game in 2022 when the rate hike cycle started, but their aggressive rate actions successfully curbed price pressures, boosting investor confidence and creating a more favorable environment for equities. Furthermore, the ongoing economic recovery, supported by strong employment figures and consumer spending, has contributed to the market's upward trajectory. We are on the cusp of the final FOMC meeting of 2024, and the current expectation is for the Fed to cut rates by an additional twenty-five basis points bringing the Fed Funds Rate down to an effective rate of 4.33% (current effective rate is 4.58%).

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Corporate earnings have also played a crucial role in driving the market's performance. Many companies have reported better-than-expected results, reflecting improved profitability and resilience in the face of economic challenges. This positive earnings momentum has instilled optimism among investors and fueled demand for stocks. Yes, there have been some bumps along the journey such as earnings that were not as robust as expected and guidance that did not exceed consensus views. That said, we continue to see significant fundamental strength in the markets and believe this sets the stage for a potentially positive 2025.

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However, it is important to note that the market's performance has not been uniform across all sectors. While technology, telecommunications and consumer discretionary stocks have been among the top performers, other sectors like energy and materials have lagged. This divergence in performance underscores the importance of diversification and sector-specific analysis when investing in the market. We only need to think back to 2022 when the relative winners were Energy, Utilities, and Consumer Discretionary given the downturn in the markets. Again, this underscores the importance of maintaining a diversified portfolio while also allowing for points in time where we can weight factors higher or lower according to the business cycles.

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Looking ahead, the outlook for the US stock market remains cautiously optimistic. While the near-term trajectory is likely to be influenced by factors such as interest rate decisions, geopolitical events, and corporate earnings, the underlying fundamentals suggest continued strength in the market. That said, we will continue to remain vigilant and perform our 5-step due diligence while also taking corrective actions when necessary. We do recognize that we are establishing record highs in the markets and there may be pockets of volatility in 2025, but we still believe that there are reasons for optimism and that we may potentially see a continuation of the bullish market.

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In conclusion, the US stock market's year-to-date performance in 2024 has been extremely strong given the combination of favorable economic conditions, easing inflation concerns, and strong corporate earnings. During the holiday season, we want you to focus on your family and friends and know that we are working to provide you with Financial Peace of Mind. For those of you that are snowbirds and making your way towards warmer states this winter or simply traveling, we hope that you have safe journeys and enjoy the holiday season with your loved ones. We wish you all the best this holiday season and look forward to meeting with you again in 2025.