Markets Wrap Up 2024 with a Whimper, But Still Post Impressive Gains
As the clock struck midnight on December 31, 2024, the US stock market closed out the year on a somewhat sour note, with all three major indexes slipping into the red. However, despite this lackluster finish, the year as a whole was a resounding success, with the S&P 500 posting a 23% gain, the Nasdaq Composite up nearly 30%, and the Dow Jones Industrial Average notching a more modest 13% increase.
The “Magnificent Seven” Stocks Shine Bright
One of the biggest stories of the year was the phenomenal performance of the “Magnificent Seven” stocks, consisting of Apple, Alphabet, Microsoft, Amazon, Meta, Tesla, and Nvidia. These tech giants averaged stock gains of over 60%, far outpacing the broader market’s roughly 24% yearly return. Nvidia took the top spot, rallying more than 170% and fully capitalizing on the AI mania that struck the market this year.
Artificial Intelligence Drives Market Growth
The artificial intelligence trade was a major driver of market growth in 2024, with many AI-themed stocks thriving in the bull market. Palantir, in particular, was a standout performer, with a nearly 350% gain for the year. However, not all AI stocks were winners, with Super Micro Computer’s shares struggling to keep pace with its peers.
Federal Reserve’s Cautious Approach
The Federal Reserve’s stance that interest rates will remain “higher for longer” will extend into 2025, even as the central bank has cut rates three times this year. Fed Chair Powell has said he expects inflation to remain more elevated than previously thought, which could impact the number of expected rate cuts next year. Market bets on the Fed’s first policy decision of the new year predict rates to stay the same, with a roughly 90% chance.
Retail Investors Enjoy Banner Year
Retail investors had a banner year in 2024, with many sticking to tried-and-true large-cap tech names that raked in big profits and promised advances in artificial intelligence. The six corporate tickers with the most retail investor inflows were a who’s who of tech momentum trades, including AMD, Nvidia, Apple, Palantir, Tesla, and Amazon. These five names pulled in $67.7 billion in total retail inflows this year.
Billionaire Investor Bill Ackman’s Bold Prediction
Billionaire investor Bill Ackman is stoking new speculation that the Trump administration could end one of the oldest fights on Wall Street by loosening the federal government’s grip over Freddie Mac and Fannie Mae. Ackman said Monday that “there is a credible path” for the mortgage giants to be removed from government conservatorship and made into private companies within the next two years, which could result in an initial public offering in 2026.
Looking Ahead to 2025
As we head into 2025, analysts are predicting another robust year for investors, with S&P 500 earnings expected to grow 15% year over year. However, there are also potential headwinds on the horizon, including the possibility of inflationary pressures and tensions between the Fed and the incoming White House. One thing is certain, though – 2025 is shaping up to be another exciting year for the markets.
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