MARKET UPDATE: RECAP OF KEY TRENDS IN 2024 AND OUTLOOK ON WHAT IS AHEAD FOR 2025
While the 4th quarter was a volatile ride, US equity markets finished the month higher, capping off another year of 20%+ returns. Not all markets were created equal, however, as international markets saw large declines in the quarter, ending the year with single digit positive returns. Finally, fixed income markets were the focus towards the end of the year as yields moved rapidly amidst election results and Federal Reserve rhetoric. Fixed Income markets saw contractions in the 4th quarter, finishing the year just slightly above 1%.
GOOD NEWS IS BAD NEWS?
Macroeconomic data points continued to be strong at the end of the year. Year over year inflation (CPI) reached as low as 2.4% in September, and despite the small pick up at the end of the year (2.9% December reading), remains trending towards the Fed’s long-term target. Third quarter GDP continued to show strength, growing at a 1.2% rate from the prior reading. Finally, the employment market has been remarkably resilient with the unemployment rate sitting at 4.1%, and the economy adding 256,000 jobs in December.
On paper, this has given a nice backdrop for the Fed to continue on their rate cutting cycle throughout 2025. However, markets have not been so sure of this. Throughout the 4th quarter, we saw the 10-year treasury rate move from 3.81% to 4.58% at the end of the year. This has extended into early 2025, with the 10-year treasury now sitting just shy of 4.8% as we write this.
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