Happy New Year!
2024 was a year of geopolitical instability, and 2025 has already started off with a bang as Justin Trudeau announced his resignation earlier this week. 2024 proved to be an exceptional year for the stock market, with major indices delivering impressive returns for the second consecutive year. The S&P 500 rose by 24.3%, marking its second straight year of 20%+ gains, a feat not seen since 1998. Several notable trends and events characterized this robust performance:
Market Breadth and Sector Performance
The year witnessed a significant broadening of market performance. While the “Magnificent Seven” tech stocks dominated in the first half, contributing 60% of the S&P 500’s returns, their influence waned to 23% in the second half through November. This shift led to a more balanced market, with various sectors contributing to overall gains.
Global Performance
Developed market equities delivered total returns of 19.2%, while emerging market equities rose by 8.1%1. Japanese equities stood out with a 20.5% return, benefiting from ongoing corporate reforms and a weak yen.
Fixed Income and Commodities
High-yield bonds were the top-performing fixed-income sector for the fourth consecutive year, with returns exceeding 8%. Gold also had a strong year, rising 26.7% and reaching record highs.
Economic Factors
The U.S. economy showed resilience, with GDP growth averaging 2.6% quarter-on-quarter annualized over the first three quarters. This economic strength and the Federal Reserve’s pivot towards rate cuts fueled investor optimism.
Looking Ahead
As we enter 2025, investors should temper their expectations and brace for some volatility. While the economic backdrop remains supportive, with continued growth and potential interest rate cuts on the horizon, there are several factors to consider:
Valuations: The market’s strong rally has left stocks somewhat overvalued, potentially limiting the upside.
Interest Rate Policy: The Federal Reserve’s approach to rate cuts will be crucial, with current expectations for fewer cuts than initially anticipated.
Political Uncertainty: The recent U.S. election and potential policy changes could impact market dynamics. Canadian election is expected as early as the spring.
While 20%+ gains may be unlikely for another year, the overall outlook remains cautiously optimistic. As always, don’t hesitate to call us if you want to discuss your portfolio.
Wishing you all the Best in 2025!
Tracey & Paige
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