#Outlook2025 | Happy New Year
What changes from today? From stock market to auto sector, here are some of the key updates to keep an eye on👇 #NewYear2025 #NewYear #RBI #luxury pic.twitter.com/zeu8nRugBo
— ET NOW (@ETNOWlive) January 1, 2025
The US stock market wrapped up a stellar 2024 by marking a rare achievement: back-to-back annual gains of more than 20%. This has only happened a handful of times in history, with the S&P 500 gaining over 23% after rising 24% in 2023. Similar feats were accomplished in 1997-1998, 1927-1928, 1935-1936, and 1954-1955.
The strong performance means better returns for retirement plans invested in indices like the S&P 500.
Last story of 2024 is a quick stocks wrap-up. Happy New Year's Eve!!!!https://t.co/FLn8HdgiDi
— Dan Primack (@danprimack) December 31, 2024
Wall Street saw impressive returns as inflation cooled, consumer spending remained strong, and the job market proved solid but slowing. Investors were particularly bullish on tech companies, pushing stocks to surge in November.
The Dow rose 12.9% this year, while the Nasdaq gained 28.6%.
Many of the stock market's best years over the past three decades started with low expectations.
Earnings expectations grew 9% last year, and analysts now expect the biggest increase in S&P 500 profits this year since 2018.
Expectations matter.
A low bar is easier to hurdle. pic.twitter.com/HGSmwqE7v5
— Callie Cox (@callieabost) January 2, 2025
The S&P 500, bolstered by strong earnings growth, has risen approximately 53% over the past two years, helping US markets outperform stocks in Europe and Asia. Terry Sandven, chief equity strategist at US Bank Wealth Management, said, “Inflation is waning, interest-rate cuts are in motion and earnings are trending higher, all which bolster sentiment and provide valuation support.”
However, some analysts caution that stocks may be overvalued, raising concerns about the speed of future Federal Reserve rate cuts.
Back-to-back gains bolster market confidence
Jeffrey Buchbinder, chief equity strategist at LPL Financial, noted, “If resurgent inflation takes rate cuts off the table or speculation gets out of hand, this bull market could have a difficult time making it through next year.”
December proved to be the worst month since April for both the S&P 500 and the Nasdaq. Callie Cox, chief market strategist at Ritholtz Wealth Management, said, “Everybody’s expecting a good year next year, and that leaves a lot of room for disappointment.”
The Federal Reserve began cutting interest rates in September after holding them at near-historical highs since the summer of 2023.
Cooling inflation boosted investor optimism, although the Fed indicated fewer cuts in 2025 than previously anticipated. Tech companies had a standout year, with the “Magnificent Seven” accounting for over 50% of the S&P 500’s total returns. Nvidia surged 179%, while most companies in the S&P 500 fell since November.
The Nasdaq Composite soared by 28.6%, lifted by investor confidence in tech and AI. In the bond market, the yield on the 10-year US Treasury note edged to 4.57%, indicating expectations of future economic growth and inflation. The US dollar also strengthened, gaining over 7.1% throughout the year.
Bitcoin surged by about 120%, while gold rose by 27% as investors sought a safe haven. As the markets head into 2025, analysts appear cautiously optimistic, emphasizing the need for careful watch over inflation, Federal Reserve policies, and overall economic growth.
