Articles | January 9, 2025
December 2024 Financial Markets Recap: No Santa Claus Rally This Year
By Sue Crotty
The month of December was a down month despite continued economic data that supports a soft-landing scenario. Unemployment claims for the last weeks of the year came in mixed, with the four-week average rising by 1,250 to 225,000, but continuing claims falling by 5,000 to 1.87 million. The Federal Reserve cut its benchmark rate again in December, the third and last cut for the year 2024. So, we begin 2025 at an effective rate of 4.3 percent and a target range 4.25 percent–4.50 percent. While the cut was widely expected, the Federal reserve projections for 2025 of just two rate cuts was unexpected and equity markets declined and interest rates rose.
| Equity | YTD (%) | MTD (%) |
|---|---|---|
| All Cap U.S. Stocks |
|
|
| Russell 3000 | 23.8 | -3.1 |
| Growth | 32.5 | 0.4 |
| Value | 14 | -6.9 |
| Large Cap U.S. Stocks |
|
|
| S&P 500® | 25 | -2.4 |
|
Russell 1000 |
24.5 | -2.8 |
| Growth | 33.4 | 0.9 |
| Value | 14.4 | -6.8 |
|
Mid Cap U.S. Stocks |
|
|
|
S&P 400 |
13.9 | -7.1 |
|
Russell Midcap |
15.3 | -7 |
| Growth | 22.1 | -6.2 |
| Value | 13.1 | -7.3 |
| Small Cap U.S. Stocks |
|
|
| S&P 600 | 8.7 | -8 |
| Russell 2000 | 11.5 | -8.3 |
| Growth | 15.2 | -8.2 |
| Value | 8.1 | -8.3 |
| International |
|
|
| MSCI EAFE NR (USD) | 3.8 | -2.3 |
| MSCI EAFE NR (LOC) | 11.3 | 0.4 |
| MSCI EM NR (USD) | 7.5 | -0.1 |
| MSCI EM NR (LOC) | 13.1 | 1.2 |
| Fixed Income | YTD (%) | MTD (%) |
|---|---|---|
| Bloomberg |
|
|
| U.S. Aggregate | 1.3 | -1.6 |
| U.S. Treasury: 1-3 Year | 4 | 0.2 |
| U.S. Treasury | 0.6 | -1.5 |
| U.S. Treasury Long | -6.4 | -5.3 |
| U.S. TIPS | 1.8 | -1.6 |
| U.S. Credit: 1-3 Year | 5.1 | 0.2 |
| U.S. Intermediate Credit | 4 | -0.7 |
| U.S. Credit | 2 | -1.9 |
| U.S. Intermediate G/C | 3 | -0.6 |
| U.S. Govt/Credit | 1.2 | -1.7 |
| U.S. Govt/Credit Long | -4.2 | -4.8 |
| U.S. MBS | 1.2 | -1.6 |
| U.S. Corp High Yield | 8.2 | -0.4 |
| Global Aggregate (USD) | -1.7 | -2.1 |
| Emerging Markets (USD) | 6.6 | -1.2 |
| Morningstar/LSTA |
|
|
| Leveraged Loan | 9 | 0.6 |
| Alternatives | YTD (%) | MTD (%) |
|---|---|---|
| Bloomberg Commodity | 5.4 | 1 |
| S&P GSCI | 9.2 | 3.3 |
Source: Segal Marco Advisors
Equity markets
As the title of our monthly note implies, we did not see the usual uptick in the equity markets in December. After November’s strong rally, it seems that investors needed a pause going into the year end. Despite the S&P 500 dropping -2.4 percent in the month, the full year return of 25 percent was very strong. Adding in the 2023 return of 26.3 percent, we have seen two back-to-back double-digit equity markets. Not since the 90s have we seen this sort of consecutive strength. Overall the market has been driven by a small cadre of tech- and growth-related stocks, as demonstrated by the S&P equal weighted index returned 13 percent in 2024. Growth was the winner in the month and year to date across all capitalizations.
Small cap stocks took the hardest hit in the month, after having returned 11 percent in November. The Russell 2000 was down -8.3 percent in the month, bringing the year-to-date return down from 21.6 percent for the eleven months ended November to 11.5 percent for the year 2024.
Non-U.S. stocks and emerging markets were not spared during the month (-2.3 percent, -0.1 percent respectively), although positive, year-to-date Developed Markets underperformed Emerging Markets (3.8 percent, 7.5 percent).
Fixed income
Continuing the post-election trend, interest rates rose again, despite the Federal Reserve cutting the benchmark Federal Funds Rate. The 10-Year Treasury closed 2024 at 4.58 percent and the 30-year ended the year at 4.78 percent (for reference the yield on January 1, 2024, was 3.95 percent and 4.08 percent). For the month of December, the Bloomberg Aggregate declined (-1.6 percent) as did all other fixed income assets with the exception of the 1–3-year Index (0.2 percent) and Leveraged Loans (0.6 percent). For the year the Aggregate was slightly positive at 1.3 percent with the largest loss in the Long Treasury Index down -6.4 percent.
Looking ahead
Interest rate policy has dominated the markets throughout 2024, and likely will continue in 2025. We have an incoming administration and uncertainty around immigration, tariffs, taxes and the like, which will certainly have an impact on companies and markets. We ended 2024 with another strong year of profits for Corporate America, with 9 percent for the S&P 500 and the valuation on the S&P at 21.5. A sizable percentage of both earnings and valuation is being driven by technology stocks, which now comprise 32 percent of the index. Expectations are for earnings in 2025 to exceed 14 percent, which seems high, but also would be necessary to maintain the valuations where they stand today for large cap stocks, although small and Non-U.S. are not nearly as pricey.
Happy New Year.
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The information and opinions herein provided by third parties have been obtained from sources believed to be reliable, but accuracy and completeness cannot be guaranteed. This article and the data and analysis herein is intended for general education only and not as investment advice. It is not intended for use as a basis for investment decisions, nor should it be construed as advice designed to meet the needs of any particular investor. On all matters involving legal interpretations and regulatory issues, investors should consult legal counsel.
