Insights

Fourth Quarter, 2024 Market Review

January 21, 2025

Dear Clients,

Before we reflect on the past year, we want to take a moment to acknowledge the devastating wildfires that have ravaged Southern California this January. The destruction caused by the Palisades, Eaton, and Hurst fires has profoundly impacted our communities, with hundreds of homes lost, lives tragically cut short, and countless others forever changed. With the majority of our clients and team based in California, we know these events have touched many of you directly or indirectly. Our hearts are heavy as we think of those affected, and we remain steadfast in our commitment to supporting you during this challenging time. Please don’t hesitate to reach out if there is anything we can do to assist you, your family, or your community. It is during moments like these that we are reminded of the strength and resilience of the people we are so privileged to work alongside every day.

Looking back at 2024, we are reminded of the year’s unique challenges and remarkable progress. Against a backdrop of geopolitical tensions, economic uncertainty, and an election cycle, the financial markets demonstrated their resilience once again. Despite the complexities, the markets rewarded patient and long-term investors, proving that perseverance and adaptability often prevail.

Navigating a Year of Uncertainty

The year began with widespread concerns over persistent inflation, fluctuating interest rates, and global conflicts. Headlines warned of potential downturns, casting doubt on the strength of the economy. Yet, time and again, businesses adapted, entrepreneurs innovated, and industries found ways to thrive. This drive to tackle challenges and seize opportunities fueled economic progress, even in the face of uncertainty.

While markets may seem unpredictable in the short term, they are rooted in a simple truth: people and businesses continuously seek solutions to problems, unlocking growth and innovation along the way.

Market Performance in 2024: Resilience in Action

Equity Markets

• The U.S. Stock Market, as represented by the S&P 500 Index, achieved a total return of 25% in 2024, marking an impressive cumulative return of 58% since the beginning of 2023. Achieving a return exceeding 20% in consecutive years is a rare occurrence, having happened only four times since 1900.
• U.S. small-cap companies also posted strong double-digit growth.
• U.S. growth stocks demonstrated a robust recovery in the fourth quarter, outperforming value stocks across large, mid, and small-cap segments.
• International and emerging markets advanced at a more measured pace, partially constrained by a strengthening U.S. dollar. For those considering international travel, this may be an opportune time to benefit from favorable exchange rates.

Fixed Income

• Gains were more modest, as bond yields responded to a shifting monetary policy landscape.
• The Federal Reserve’s interest rate cuts in the latter half of the year contributed to some relief in the short end of the yield curve, while longer-term yields reflected expectations of stronger economic growth and inflation.

Wall Street: Predictions vs. Reality⁵

At the start of 2024, major Wall Street firms offered a wide spectrum of forecasts for the S&P 500 index. These predictions highlight how markets often defy even the most informed expectations:

• November 21, 2023: Bank of America forecasted 5,000, commending corporate resilience in adapting to higher rates and inflation.
• November 28, 2023: Barclays predicted 4,800, with expectations of easing inflation tempered by slowing economic momentum.
• November 27, 2023: BMO Capital Markets aligned with 5,100, expecting broader, more fundamentals-driven performance compared to recent tech-led gains.
• December 1, 2023: Capital Economics set the highest projection at 5,500, banking on enthusiasm for AI and continued valuation expansion.
• November 27, 2023: Deutsche Bank predicted 5,100, emphasizing the potential impact of falling inflation and steady earnings growth.
• December 8, 2023: Fundstrat expressed bullish confidence with a target of 5,200, pointing to AI-driven growth and market breadth.
• November 15, 2023: Goldman Sachs estimated 4,700, based on measured economic growth and modest earnings expansion.
• November 29, 2023: JPMorgan adopted a cautious stance with a projection of 4,200, referencing slowing growth and tightening credit conditions.
• November 13, 2023: Morgan Stanley set a more conservative target of 4,500, citing near-term uncertainties but optimism for AI-led recovery by 2025.
• November 22, 2023: RBC Capital Markets targeted 5,000, citing strong signals in valuations and sentiment despite political and economic uncertainty.
• November 20, 2023: Societe Generale offered a cautious prediction of 4,750, anticipating mid-year recession risks and credit market volatility.
• November 8, 2023: UBS forecasted 4,600, reflecting balanced equity risk premiums and declining yields.
• November 27, 2023: Wells Fargo predicted a flattish year with a target of 4,625, citing heightened rate uncertainty.

By the end of the year, the S&P 500 closed at 5,881.63, far exceeding the most optimistic predictions.

These divergent forecasts serve as a valuable reminder: even the most seasoned analysts with extensive resources often struggle to predict market outcomes accurately. This unpredictability underscores the importance of focusing on long-term goals and maintaining a disciplined investment strategy.

Managing Emotions in a Strong Market

With two consecutive years of robust performance, it’s natural to feel a mix of emotions. While some may feel renewed confidence, others might regret not having invested more aggressively.

It’s important to remember that emotional reactions—whether driven by fear during downturns or excitement during rallies—can lead to costly mistakes. A diversified portfolio is designed to balance risk and reward, aligned with your unique goals and financial plan. Missing out on the top-performing asset class is not a failure; it reflects a sound and intentional strategy that prioritizes stability and long-term success.

Focusing on What Matters Most

Financial planning is about more than numbers—it’s about your goals, values, and vision for the future. Whether you’re planning for retirement, supporting your family, or giving back to your community, we are here to help align your financial resources with your aspirations.

As we enter 2025, we remain committed to guiding you through the ever-evolving investment landscape. With a disciplined, evidence-based approach, we’ll continue to navigate the complexities of the market together.

Thank you for your continued trust and partnership.

THE LOURDMURRAY TEAM

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⁵ Source: Financial Samurai, December 27, 2024, 2024 Wall Street Forecasts For The S&P 500: More Positive Outlook, https://www.financialsamurai.com/2024-wall-street-forecasts-for-the-sp-500-stock-market/