Mixed End to 2024: Stock Market Trends and Beyond
Stock Market: A Year of Highs and Lows
December 2024 closed with a mixed performance across major U.S. equity indexes. While the Nasdaq 100 celebrated a monthly all-time high with a 0.39% gain, the Dow Jones Industrial Average faced a notable decline of 5.27%, marking its longest losing streak since 1978. Similarly, the S&P 500 decreased by 2.50% this month. Despite the disappointing December, U.S. stock indexes have enjoyed a remarkable two-year stretch, reminiscent of 1998's performance. Amid interest rate changes and tariff concerns, the importance of long-term investing remains evident as markets eventually rallied.
High Interest in Bonds as Yields Rise
Bonds generally pleased investors throughout most of 2024, yet December saw a shift as yields rose. With the 10-year note's yield increasing by nearly 39.5 basis points, December ended around 4.573%. This rise reflects both persistent inflation and uncertainty over economic policies under a new presidential administration. Investors looking into bonds may find 5% as a potential high point, but such decisions depend on personal time horizons and bond types. Remember, even in seasons of rising rates, bonds serve as vital elements of a diversified portfolio.
The Fed’s Shifting Stance on Monetary Policy
The Federal Reserve's December decision to cut the benchmark overnight lending rate by 25 basis points, aligning it between 4.25%-4.50%, came as an anticipated relief. Yet, only two further rate cuts are projected for 2025, in contrast to an earlier estimate of four. This adjusted outlook prompted market volatility but highlighted the importance of diversifying investments.
Labor Market Delivers "Just Right" Jobs Report
December's jobs report met market expectations with a significant increase of 227,000 nonfarm payrolls, surprisingly surpassing the Dow Jones estimate of 214,000. The healthy job market results, particularly in health care, social assistance, and leisure sectors, fueled hopes for rate cut prospects and supported economic growth without overheating risks. The U.S. unemployment rate ticked up to 4.2%, in line with projections.
Inflation and Market Dynamics
Consumer Price Index data showed a slight monthly inflation rise of 0.3%, raising the annual rate to 2.7%. Core CPI witnessed a year-over-year increase of 3.3%. Despite selling off by week's end, major equity indexes initially responded positively to the consumer inflation data. The Producer Price Index, meanwhile, posted higher-than-expected prices. Driven primarily by food, this development indicated the ongoing challenges faced in tackling inflation.
December's blend of events—ranging from AI and quantum computing advancements to market reactions—highlights the unpredictable nature of financial markets. To navigate these dynamics efficiently, we encourage readers to consult with their financial team for tailored assistance and support.