S4E2 – 2024 Q4 Review and Market Outlook

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Today, we’re conducting our Q4 2024 market review and upcoming market outlook. We’ll examine what happened last year and what may lie ahead to help listeners set realistic expectations.

2024 Market Highlights

• S&P 500 Performance: 2024 closed with another year of +20% returns.
• Q4 Results: Large-cap tech stocks rose 7%, while large-cap value stocks declined slightly. International and emerging markets underperformed, but most asset classes saw positive annual returns.
• Market Resilience: Despite challenges, the market largely shrugged off concerns, including inflation, Federal Reserve actions, and geopolitical events.

Labor Market Overview

• Strength and Stability: The labor market remains resilient with low unemployment, despite significant interest rate hikes in 2022 and 2023.
• Sector Variability: Growth is concentrated in healthcare and government sectors, while tech lags. Overall, the labor market is robust, supporting strong consumer spending.

Interest Rates and Yield Curve

• Rates and Inflation: Interest rates have stayed higher than expected, with the Federal Reserve lowering short-term rates in late 2024. However, long-term yields have risen, signaling a return to a normal yield curve.
• Implications: A normal yield curve is a positive economic indicator, even if it frustrates those seeking lower mortgage rates. Elevated yields provide better returns for fixed-income investors.

Glass Half Full: Positive Economic Indicators

1. Resilient Economy: Strong labor markets and steady consumer spending support GDP growth.
2. Higher Yields: Safer investments now offer real returns, benefiting income-focused investors.
3. Policy Outlook: Growth-focused policies and deregulation could provide short-term economic stimulus.

Glass Half Empty: Potential Challenges

1. Inflationary Risks: Policies like tariffs and reduced immigration may drive inflation by increasing costs for labor and goods.
2. Housing Market: High mortgage rates and limited affordable housing construction remain obstacles.
3. Market Valuations: Two consecutive years of +20% returns may not be sustainable without corresponding earnings growth.

Key Takeaways for Financial Planning

• Timing the Market: Just as timing the stock market is difficult, waiting for the “perfect” time to buy a house is unrealistic. Focus on personal priorities and long-term plans.
• Valuation Concerns: High market valuations require strong earnings growth to sustain current levels. Monitor earnings reports closely for alignment with market expectations.

At Shotwell-Rudder Bear, our approach starts with a fit meeting to see if we’re the right match for your financial needs. Trust is the foundation of our relationships, and we’re here to help you create a tailored plan. Visit srbadvisors.com to get started today.

You can also reach out by calling us at 517-321-4832 or info@srbadvisors.com.

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