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Reflections, Expectations

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I hope your start to the new year has been going well and that you made some special memories with your loved ones over the holidays. For my part, please know that it was a joy to serve you last year, and I greatly look forward to working with you in the year ahead!

As we step into 2025, I thought it would be beneficial to take a moment and reflect on what an extraordinary year 2024 was for investors.

[Not interested in market commentary? Skip to the postscript for a fun fact about 2025.]

Despite persistent concerns about the economy, inflation, and political uncertainty, the stock market delivered an impressive performance. The S&P 500 surged over 23%, marking back-to-back years of gains exceeding 20%—a feat we haven’t seen since the late 1990s. (1)

Graph of 2024 S&P 500 Return

An impressive year for the S&P 500, returning over 20% despite economic and political uncertainty.

What were the factors affecting market performance?

One of the biggest drivers of this market success was the Federal Reserve’s shift to lower interest rates after years of aggressive tightening. Although rate cuts were gradual and fewer than anticipated, they provided meaningful support to market momentum.  Mortgage rates dipped, borrowing costs eased, and hopes grew for a ‘soft landing’ rather than a recession. (2)

At the same time, U.S. economic growth outperformed expectations, with GDP expanding steadily throughout the year. (3) Consumer spending remained resilient, and despite lingering inflation pressures, the economy proved remarkably durable. (4)

Of course, not all sectors shared equally in the market’s success. Technology stocks dominated the headlines, with the so-called “Magnificent Seven”—companies like Nvidia, Microsoft, and Apple—leading the charge. (5) Artificial Intelligence remained the defining theme of the year, capturing investor enthusiasm and driving valuations to historic highs. (6) Yet, as the year progressed, we saw broader market participation, with other sectors beginning to share in the rally.

Political and geopolitical events also influenced the year. Markets experienced volatility following the presidential election, initially surging on optimism before tempering gains as concerns about potential inflationary pressures emerged. (7) Meanwhile, geopolitical tensions and uncertainty around the Federal Reserve’s future policy decisions added volatility throughout the year. (8)

Keep in mind that while the S&P 500 had an impressive return last year, other asset classes that investors own in globally balanced portfolios－such as bonds, REITs, international stocks and commodities－finished the year with low single-digit returns. In the commodity space, gold was a sparkling exception that even outperformed the S&P 500.

What’s ahead for 2025?

Looking ahead, we’re entering what could be a year of change and uncertainty. As a student of market history, however, I'm not sure how profound that statement is, because markets are always uncertain. After such a significant market run, it's fair that expectations for continued outsized gains are more tempered. Analysts are cautiously optimistic, forecasting more modest market growth this year. (9)

As your financial advisor, my role is not to predict market outcomes—it’s to prepare and adapt your financial strategy no matter what 2025 brings. Whether it’s economic shifts, political changes, or market volatility, I’m here to help you navigate it all. 

∞

P.S. Please remember that this commentary reflects broad market trends and performance. Individual portfolio results will vary depending on factors like risk tolerance, asset allocation, and investment strategy. If your results don’t mirror these market highs, that’s perfectly normal—and it doesn’t necessarily mean your portfolio isn’t performing as it should.

P.P.S. Here’s a fun fact about the new year: 2025 is a rare perfect square year—it’s 45 squared. The last time this happened was in 1936; the next time won’t be until 2116. So, here’s to a mathematically special year ahead! (10)