The markets were strong and remarkably steady in 2024 despite a presidential election and multiple wars across the globe. Inflation trended downward and allowed the Federal Reserve to begin lowering interest rates. Inflation will continue to be a major theme in 2025 as the economy digests the impact of new policies from the incoming administration. We very well may see another strong year for stocks given optimism around pro-business policies and a healthy labor force, but volatility will likely be higher in 2025 so it’s important to keep a balanced perspective and focus on your long-term goals.
Stocks Were Strong and Steady in 2024
The S&P 500 gained 25.02% in 2024.1 It was driven more by growth-oriented companies than value-oriented companies2 with artificial intelligence still being a major catalyst.3 What is remarkable is how steady the market was despite a presidential election and multiple wars across the globe. The market traded 5% or more below its all-time high for only eight trading days. By comparison, 2023 which also saw 25%+ returns experienced twenty-six such days.4
Interest Rates Coming Down
The Federal Reserve dropped the Federal Funds rate by a full 1.00% in 2024 from a range of 5.25% – 5.50% to 4.25% – 4.50%.5 Expectations are for another 0.50% – 0.75% decline in 2025.6 As was the case in 2024, the magnitude and timing of future cuts (or even expectations of future cuts) could weigh heavily on the market.
Lessons from the SoCal Fires
Our hearts go out to those affected by the fires in Southern California as well as those suffering from natural disasters across the world. In times like these, it reminds us of the importance of planning, whether that’s emergency preparedness planning or financial planning. It also reminds us to prioritize what matters most to us. Lastly, it’s a reminder that despite our best plans, there are forces out of our control. We need to learn to adapt to those forces, rebuild our lives where necessary, and lend a hand to our neighbors if we’re able to.
Sources & Disclosures
1. Data from Kwanti.com based on the S&P 500 Total Return index
2. Data from Kwanti.com based on Vanguard Growth ETF (32.69%) and Vanguard Value ETF (15.94%)
4. Data from Kwanti.com based on the S&P 500 Total Return index
5. https://fred.stlouisfed.org/graph/?id=DFEDTARU
6. https://fred.stlouisfed.org/graph/?id=FEDTARRH
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