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2024 Markets in Review: A Year of Resilience and Continued Growth Thumbnail

2024 Markets in Review: A Year of Resilience and Continued Growth

Financial markets showcased impressive strength and resilience in 2024, delivering promising returns for both equity and bond investors. Building on momentum from the bull market that began in late 2022, stocks navigated evolving monetary policies, uncertainties around the U.S. election, and typical market volatility to post double-digit gains across all major U.S. indexes:

  • S&P 500: +25%
  • Dow Jones: +15%
  • Nasdaq: +30%

5 Key Drivers of 2024 Market Gains

  1. AI Boom: The "Magnificent 7" (the seven largest tech companies) fueled market growth as investors embraced themes surrounding artificial intelligence, generative AI, and the semiconductor sector.
  2. Cooling Inflation: Inflation reached multi-year lows of 3.3% year-over-year by November, trending closer to the Federal Reserve's target range of 2–2.5%. This alleviated one of the market's biggest risks in recent years.
  3. Monetary Policy: In response to cooling inflation, the Federal Reserve cut interest rates three times starting in September—the first cuts since March 2020—bringing the target rate to 4.25–4.5%.
  4. Strong Consumer Spending: Despite concerns about higher borrowing costs and living expenses, consumer spending remained robust, providing significant support for economic growth.
  5. Earnings Growth: Corporate earnings reflected solid growth, primarily driven by expanding profit margins.

Equity Markets in 2024

  • Global Equity Markets: Global equities delivered a strong performance, returning 17.5% (MSCI All Country Index).
  • Regional Highlights:
    • U.S.: +25% (S&P 500): The S&P achieved back-to-back 20%+ returns for the first time since 1998–1999.
    • Emerging Markets: +7.5% (MSCI Emerging Markets): Taiwan (+28.5%) and Malaysia (+22.7%) led the gains.
    • International Developed Markets: +4.7% (MSCI ex USA): Israel (+34%) and Singapore (+29.6%) were top performers.
  • The strengthening U.S. dollar weighed on international equity returns, highlighting the dominance of U.S. markets in 2024.

Bond Markets in 2024

  • Broad Performance: Bonds generally performed well, with the Bloomberg Global Aggregate Bond Index (hedged to USD) up 3.4% for the year.
  • 10-Year Treasury Yields: Despite the Fed’s rate cuts, the bond market behaved unexpectedly, with 10-year Treasury yields rising due to various factors.
  • Normalization: Investors began earning higher returns for committing to longer-term bonds, signaling a gradual normalization in the market.

Looking Ahead to 2025

As we enter the New Year, uncertainty looms large. Markets are adjusting to the new Trump administration, potential policy shifts, geopolitical risks, and other challenges. This underscores the importance of maintaining a diversified portfolio that spans all market sectors.

Taking a long-term perspective remains critical to navigating short-term volatility and achieving sustainable investment success.