The Mag 7 (GOOGL, AMZN, AAPL, META, MSFT, NVDA, TSLA) continued to lead the market returning an average of 60.6% over the year on top of the average 111.6% gain in 2023. These names now account for 31.7% of the index, up from 27% at the end of last year. Market breadth improved in the post-election period, with small-caps and cyclicals making strong moves higher, though they still underperformed for the full year. Bitcoin also benefited from the post-election rally, reaching a new all-time high of $106,000 in December.
Inflation continued its downward trend, with headline CPI falling from 3.4% in December 2023 to 2.7% in November 2024, after touching a low of 2.4% in September. Despite concerns about consumer pressure, spending has remained strong, buoyed by robust household balance sheets and continued wage growth. The unemployment rate ticked up to 4.2% but remains low by historic standards, helping drive real GDP growth of 2.7% in the third quarter.
Given the economy's strength and improving inflation outlook, the Federal Reserve began easing monetary policy, cutting rates by 100 basis points to end the year at 4.25-4.50%. However, with inflation expectations ticking up, markets are only pricing in an additional 50 basis points of cuts for 2025.
Despite the Fed's rate cuts, longer-term rates moved higher, with the 10-year Treasury yield climbing to 4.6% from 3.9% and 30-year mortgage rates rising to 6.9% from 6.6% at the end of 2023.
Investor sentiment began 2024 at neutral levels despite strong 2023 returns, creating an attractive setup for the year ahead. While the Bank of America Bull/Bear Indicator surged to 7 out of 10 in October, it retreated to a neutral reading of 3.4 by year-end, potentially setting up favorable conditions for 2025.
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The Nasdaq Composite continued its lead gaining 29.6% in 2024, followed by the S&P500’s 25.0% gain and the Dow Jones Industrial Average’s rise of 15.0%. Ten out of the eleven sectors in the S&P500 posted positive returns for the year, a marginal improvement from 2023. Telecommunications and Information Technology continued to lead posting returns of 40.2% and 36.6%, respectively. Materials were the only losers for the year, with a marginal decline of -0.04%.
Large-caps maintained their leadership outperforming both mid-caps and small-caps. The Russell 1000 gained 24.5% compared to the Russell Mid-Cap Index’s rise of 15.3% and Russell 2000 Index return of 11.5%. Growth maintained its lead over value, with the Russell 1000 Growth Index climbing 33.4% compared to the Russell 1000 Value Index’s gain of 14.3%.
Bonds returns were mixed with US Corporates outperforming long-dated US Treasuries with the Bloomberg Aggregate gaining 1.3% while 20+YR Treasuries lost 8.0% for the year.
The US Dollar maintained its strength gaining 7.1% over the year while Gold gained 24.1%. Commodities were roughly flat with West Texas Intermediate (WTI) crude gaining 0.1% and the Bloomberg Commodity Index returning 0.1%. Bitcoin reached an all-time high in December and ended the year at a value of $93,714.
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