Another Stellar Year
Neil Goodson, CFA
December 9, 2024
Quick Take
With the year almost over, financial markets showcased remarkable resilience, with global stock markets climbing 22% and the S&P 500 hitting 54 record highs, driven by robust economic fundamentals and investor optimism.
The bond markets saw stable returns due to higher initial yields and favorable monetary policies shifts from central banks.
Economic growth, supported by low unemployment, productivity gains, and rebounding consumer confidence, set a strong foundation for momentum heading into 2025.
2024 Financial Markets in Review: A Year of Exceptional Growth
As the end of the year approaches, financial markets have once again demonstrated a resilience and consistent capacity for exceptional performance. With strong global stock market gains, robust economic fundamentals, and positive sentiment among investors, this year has been a standout in many respects. Here’s a look into financial market performance that has defined 2024 thus far.
The global stock market has been on a remarkable run this year, with stocks climbing 22%. The U.S. markets, in particular, took center stage.
The largest U.S. companies, represented by the S&P 500, reached its 54th record high of the year. In November alone, it rose 5.9%, bringing their year-to-date return to an impressive 29%.
Despite concerns about concentration risk stemming from the dominance of technology and semiconductor stocks, other sectors outshone tech. Financials, utilities, and consumer sectors emerged as this year’s strongest performers, while healthcare, materials and real estate lagged.
Small-cap stocks also posted strong gains with the Russell 2000 Index delivering a robust 21% return.
International Stocks: A Tale of Two Halves
International markets started the year strong, buoyed by optimism and economic growth across several regions. However, as the year progressed, they lagged behind U.S. equities. The back half of 2024 saw slower gains in international markets, contributing to the relative underperformance compared to their American counterparts.
Bond Market: Fluctuating Yields
The bond market was marked by mostly sideways moves in yields this year. The 10-year Treasury yield started the year below 4%, peaking at 4.7% in April, and settling around 4.2% in recent weeks. While bond prices lacked clear direction, the higher starting yields provided a tailwind for positive returns across major bond indices. This year’s bond market performance underscores the value of higher initial yields as a stabilizing factor for investors, even amidst fluctuating rates.
Credit-sensitive bonds, investment-grade corporate and high yield have outperformed government bonds. As yield spreads for these sectors continue to tighten, the upside may be limited.
Economic Growth and Consumer Sentiment: The Foundation of Success
The strong performance of financial markets was supported by a resilient economy and a pivot in monetary policy stance by major central banks.
The U.S. economy grew steadily, underpinned by low unemployment rate, income growth, and continued corporate earnings growth. In the US in particular, productivity measures have picked up. A holy grail in economics, productivity growth is a positive development for output growth while also easing inflationary pressures.
Central banks, including the Federal Reserve, implemented interest rate cuts, providing a favorable environment for growth across asset classes. These policy moves supported economic activity while keeping borrowing costs low.
Consumer Confidence Rebounds
For much of the year, surveys suggested consumers were unhappy with the recent inflation and the direction of the economy, this past month saw a surge in consumer confidence, with the index climbing to 111.7, the highest since July 2023 and a 16-month high. Consumers are finally feeling optimistic ahead for consumers and further economic momentum.
Looking Ahead to 2025
As we move into the next year, the financial markets and the economy have momentum moving into 2025. Investors should remain mindful of sector shifts and the potential for continued volatility in bond yields while maintaining a focus on diversified portfolios to capture a wide range of opportunities.
2024 has shown that the global economy and financial markets are resilient, adaptable, and capable of delivering positive results—even amidst uncertainty. Here’s to another year of growth and opportunity!
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