With 2024 coming to a close, US stocks capped another stellar year of performance, crossing several record highs along the way. For the fifth time in six years, US stocks gained over 20% during the year (as measured by the Russell 3000 Index). Interest rate cuts from the Federal Reserve (Fed), strong economic data, declining inflation, and the expansion of AI all contributed to the climb, led predominantly by the performance of large tech companies. International stocks trailed their US counterparts over the year, but delivered positive performance led by emerging markets. Bonds gained for the year as the Fed lowered the Fed funds rate by 1% over the second half of the year, yet rates remain relatively high with inflation concerns still being in focus.
In December, US stocks pulled back as the Fed tempered expectations for rate cuts in 2025 after lowering rates for a third time at their December meeting. Previous expectations of as many as four rate cuts were scaled back to one to two rate cuts in the coming year, with persistent inflation being the main driver. During the month inflation ticked up, the job market showed resiliency, unemployment remained low, and the government avoided a shutdown.
International stocks outperformed their US counterparts during the month despite a strengthening dollar, tariff concerns, and leadership changes in France. Emerging markets outperformed developed markets.
US bonds declined for the month despite the Fed lowering rates as expectations of fewer rate cuts next year pushed yields up in December. The 10-year treasury yield climbed above 4.5%, the highest it’s been since April.
Looking forward, 2025 will have no shortage of attention-grabbing headlines. Policies from the new administration will be a focus for many as the transition of power takes place later in the month. Tariffs, deregulation, tax cuts, and immigration policies will likely all make headlines in the months ahead. Earnings reports for the fourth quarter, GDP growth, inflation readings and Fed decisions will be key points investors are monitoring as we carry into the new year, coming off back-to-back sublime years in the stock market.
| Index Performance |
December |
4Q |
Year to Date |
| US Stocks (Russell 3000) |
-3.06% |
2.63% |
23.81% |
| International Stocks (FTSE AW ex US) |
-1.88% |
-7.46% |
6.13% |
| US Bond Mkt. (BBgBarc Int. Gov/Cred) |
-0.62% |
-1.60% |
3.00% |
| Cash (ICE BofA ML 3-Mo T-Bill) |
0.40% |
1.17% |
5.25% |