A Bumpy 4th Quarter Still Ends the Year on a High Note
In the classic 1950 film All About Eve, Bette Davis’s character says, “Fasten your seatbelts. It’s going to be a bumpy night.”1 That quote would have been good advice for investors in the fourth quarter of 2024.
With more than its share of surprising social, political, and economic news, the market experienced plenty of ups and downs from October through December. But those who were securely strapped in (investing for the long-term) enjoyed another period of healthy gains. And saw a second straight year of returns above 20% for the S&P 500 stock index.
For the final three months of the year the market seemed to follow a repeating pattern. It would begin the month with a rout, climb out of it and rise for the next three weeks, only to dip again. The so-called “Santa Clause Rally” (a typical bump in values in the final days of the year) failed to materialize, leading to a 2.38% loss for the S&P 500 in December. Still, the index finished the quarter up 2.41%. And for all of 2024 the S&P 500 gained a robust 24.09%.2 With mixed news on inflation, bonds fell 3.04% for the quarter while yields on the 10-year treasury note climbed 0.76%.
The U.S. market outperformed its global counterparts by a significant margin over the quarter. This was due to strong performance from large- and mid-cap stocks. Chinese markets had losses of 8.34%. But European stocks fared even worse, losing 9.04%. Of course, the broadly diversified investor will prepare for the unexpected by holding positions in a wide variety of markets, which can and should move somewhat dissimilarly to one another.
The U.S. market reacted to several big pieces of news. The first was the Fed’s interest rate cuts in November and December, followed by the announcement that it would be making fewer than anticipated cuts in 2025. The second was the election. The largest single-day gain of the year came right after America cast its vote.3 Analysts have noted that markets often rise after an election, regardless of which party gains power.
But then there was quite a bit of news in the fourth quarter that the market seemed to ignore. Geopolitical tensions around the world remained high, with the war continuing in Ukraine and unrest spreading in the Middle East, including the collapse of Syria’s ruling regime in December. Even as long-range missiles were being fired back and forth across the world’s key oil producing region, prices for crude and gasoline continued to fall.
People also seemed to be in two minds about the financial future. The Washington Post summed it up with the headline, “Stocks Surged in 2024 Even as Americans Fretted Over the Economy.”4 The paper noted that despite people’s widespread discontent with the economy (as reflected in the election), their
investments did very well.
One reason for this contradiction may have been that many were anticipating an economic slowdown, thanks to continual predictions of a market crash by financial pundits. “There were some real concerns over the summer,” said Sameer Samana, senior global market strategist at Wells Fargo Investment Institute, “about whether we were once again heading for a hard landing and/or a recession.”
Many were spooked by the market’s largest single- day loss for the year, which came in August.
Professional forecasters were also not terribly optimistic about the market. In December of 2023 Yahoo Finance reporter Josh Schafer compiled forecasts for 2024 put out by leading financial companies.5 Bank of America predicted the S&P 500 would end the year with a gain of just over 5%. Deutsche Bank was more sanguine with a forecasted growth of nearly 7.5%. But Fundstrat was the most optimistic of all, calling for a return of more
than 9.5% (finishing at 5200 points).
When you remember that the S&P 500’s average return since 1957 has been just over 10%, and that 2023’s return had been more than 20%, these predictions seem entirely reasonable.6 And yet an investor who had acted as if 5200 would be the peak of the market and cashed out in May when the market reached that level, would have missed more than half the year’s total gains in the S&P 500.
Now is the time when investors are anticipating what might be in store for the next four quarters. The one thing we can say for sure about 2025 is that it will be a year full of surprises. Some will be welcome and some unwelcome.
Since we know that historically the prudent investor will fare best when he or she stays in the market, Bette Davis’s advice about fastening our seatbelts will be well worth remembering.
If you ever have any questions about your investments or retirement plans, please feel free to give me a call at 801-545-0696.
Regards,
Mark Lund
Stonecreek Wealth Advisors, Inc.
10421 South Jordan Gateway, Suite 600
South Jordan, UT 84095
Sources:
1. https://www.shmoop.com/quotes/fasten-your-
seatbelts-its-going-to-be-a-bumpy-night.html
2. https://www.morningstar.com/markets/13-charts-q4s-
big-post-election-rallyand-late-stumble
3. https://res.cloudinary.com/americancentury/image/
upload/docs/avantis-monthly-newsletter-intm.pdf
4. https://finance.yahoo.com/news/stocks-surged-2024-
even-americans-171908928.html
5. https://finance.yahoo.com/news/wall-street-bull-
gives-highest-2024-sp-forecast-yet-192122201.html
6. https://www.investopedia.com/ask/answers/042415/
what-average-annual-return-sp-500.asp
