Tracey A. Baker, CFP® (CJM President), David D. Greene, CFP® (CJM CEO), Kevin E. Donovan, CFA (Portfolio Research Director) and, Parker G. Trasborg, CFP® (Senior Financial Adviser) discuss markets in 2024 and thoughts on the year ahead.
Parker G. Trasborg:
Hello and happy 2025. My name is Parker Trasborg. I’m a Senior Financial Adviser with CJM Wealth Advisers and today, as always, I’ve got Kevin Donovan, our Portfolio Research Director and two special guests, our President, Tracey Baker and our CEO, David Greene. We wanted to spend a couple minutes to recap what happened in markets in 2024 and maybe a glimpse of what we’re thinking of for 2025 looking ahead.
Now, Tracey, when we got together last January, you joined us for the video as well, and you were hopeful that 2024 would be a good year for markets. Turned out that was true, maybe more than anyone was expecting. What do you think about what happened last year?
Tracey A. Baker:
I feel great. I love sitting here basking in the glow of being correct for a change. I love that. We came into 2024 having just had a monster great quarter at the end of 2023. Jerome Powell had just declared that they were finished raising rates and the market just applauded that move and we came into 2024 thinking that hopefully the Fed had waged war on inflation and they were done. And that maybe we were going to get that soft landing that the Fed was hoping for and we were going to get improvement in the markets and the economy was going to hit that soft landing. And it appears that they may have pulled that off. The markets really reacted as we had all crossed our fingers for. Sometimes hope pays off.
All the clients I met with, I remained pretty conservative in our allocations because you just don’t want to get greedy and think oh, it’s going to all be straight up from here. But boy, the markets paid off last year and 2024 is one of those good years where you plan for maybe potential bad years in the future. As planners, we always have to look ahead because markets go up and they go down, but boy, 2024 really did pay off for us. So we were really happy to be right that time.
Parker G. Trasborg:
It certainly did, and actually it’s the first time since the late 90s that we’ve seen back to back 20% positive years on the S&P 500.
Tracey A. Baker:
Amazing.
Parker G. Trasborg:
Digging into the numbers a little bit, Kevin, can you highlight about what happened through 2024?
Kevin E. Donovan:
Sure. As everyone mentioned, a great year for stocks. Not so good for bonds, but everything was positive. But there are different degrees of positivity here. So let’s take a look at the charts and first we’ll look at the 2024 market performance chart. And you can see the S&P 500, the line on top, is up 23%, way above everything else. So it’s the second year in row that the S&P 500 really ruled over the other indexes. And most of that, again, due to the same reasons as 2023. It’s the Magnificent seven, the biggest seven stocks in the index, big tech stocks did really, really well. So you had Nvidia up 170%, Meta and Tesla up over 60% and that really helped lift up the S&P 500 as a whole.
If you looked at the 493 other stocks in the S&P 500, they were only up about 10%. So similar to the Dow’s 12% gain. And then down at the bottom, unfortunately you see bonds were up only about 1.25% for the year. Now, we’ll discuss more about why that happened in a second.
But if you look at the fourth quarter, this is what really hurts bonds here on this second chart. The green line is the bond index and it lost about 3% during the quarter. Stocks did okay. The Dow was kind of flat and S&P was up about 2%, but really took the wind out of the sails in the bond market in the fourth quarter.
And if we look at the next chart, that is the 10-year Treasury Yield chart, and this really shows a lot of variation in market expectations during the year. And Tracey said in the beginning of the year, there was a lot of enthusiasm in the bond market and we expressed that in our call last year as well. But as time went on, it looked like the market really overestimated the amount of cuts that the Fed was going to make during the year. And as the market tried to recalibrate its expectations, the 10-year yield went up, peaked around April, and that means bond prices go down.
But after that, once the Fed started to lower rates, you can see that the yield declined again, and that was good for the bond prices. But towards the end of September, once again, and especially after the election, the yields really spiked higher again. That hurt bond prices in the fourth quarter. Now the reasons for that, there are several. One of which is the expectation that we may see inflation reuniting again because of the possibility of tariffs being implemented. And again, the expectation is that the Fed will be postponing just rate cuts towards later in 2025. So that’s kind of hurting bond prices right now as we speak.
But all in all, a good year for stocks. We had the growing economy, falling inflation, low unemployment, and importantly, solid corporate earnings, which really helps stock prices.
Parker G. Trasborg:
Yeah. Great year as far as stocks go. Bonds a little more wishy-washy and not what we were hoping to see happen. If you dust off your crystal ball for 2025 we are eight days into the year today, what do you see for the remainder?
Kevin E. Donovan:
Well, we just had just two great years, as you said, and there’s only one time when the S&P 500 went up by 20%, three years in a row and that was in the late 90s. And that corresponded, the later part of that was the dot-com boom. So I’m not sure if we’re going to see another 20% year. We’re still cautiously optimistic for this year if the economy does continue to be strong in the US. But as always, there are always warning signs. There are unforeseen things that come up during the year. So cautiously optimistic is the word for today.
Parker G. Trasborg:
Dave, looping you in here, what do you feel for 2025?
David D. Greene:
Yeah. Well, I think Kevin kind of stole the phrase, but it’s a phrase I think we’ve all used here in the last week or two, which is cautiously optimistic. I think we’re positive within reason. It’s a mixed bag out there as we look at some of the macroeconomic factors. Certainly unemployment has remained fairly low, inflation has remained in check as Tracey suggests with the soft landing scenario. So from an economic perspective, things seem to be set up pretty well.
With that said, when we talk about some of the geopolitical strife, wars around the world, we have a new administration coming in, there’s some unknowns there. And then markets, as Kevin just suggested, when you have two really, really good years in a row with stocks, the expectation that you’re going to get another 20% year, I would suggest is probably pretty unlikely. But we just don’t know where the economy’s going to head and markets going to guess on that. Corporate earnings remain strong as Kevin suggested.
So I think with this mixed bag, you tend to shift the focus a little bit on each of our client’s individual planning situations. And so while we don’t know, our crystal ball is really cloudy on what the performance for stocks or bonds are going to be next year, I think we’re a little more honed in on having had a plan and we know specific goals and we’ve tried to match those goals or the different needs with those goals. So as a planning firm, as much as we want to review market performance in ’24 and have some expectations in ’25, we just broaden the lens a little bit and make sure that we’re adhering to the plan that we put together as client and advisor.
Parker G. Trasborg:
I agree with you completely. The planning is the crux of what we really do to help people, and the investments are just a piece of that overall pie. So Kevin, Dave, Tracey, thank you as always for joining us today. Viewers, thank you for watching in. We wish you all a very happy and healthy 2025, and we will see you next time. Thank you.
Tracey A. Baker:
Thank you.
David D. Greene:
Thanks, Parker.
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