2024 Market Recap: Looking Ahead in 2025
The Clark Group Asset Management
Helping you maximize your life through wealth planning.
The stock market experienced a remarkable surge in 2024, largely driven by the persistent narrative surrounding artificial intelligence (AI). In this article, we'll look back on the events of 2024 and discuss our thoughts on the market in 2025.
First, let’s start with how certain asset classes performed in 2024.
2024 was another positive year for the stock market, with the S&P 500 index up about 23% for the year! It’s the second straight year with gains of more than 20%, and the last time it had back-to-back yearly gains that big was 1998.
The Nasdaq composite, which has mostly growth-oriented stocks, was up 28.6%. The Dow Jones Industrial Average rose 12.9% for the year.
The Russell 2000, which has mostly small and mid-sized companies, was up 10% for the year. Small and mid-sized companies have underperformed large-cap companies for several years now.
The Barclays aggregate bond index, which has mostly intermediate and long-term bonds, was up roughly 2% for the year (ouch), while money market funds were up roughly 4%.
Bitcoin was up 120% for 2024, while gold rose about 26%.
All the major stock indices listed above dropped in the month of December, after having a post-election spike that fueled a huge rally for the market. More specifically, the Dow Jones had its worst December in 6 years.
However, there wasn’t much volatility to the downside throughout all of 2024, except for the August decline that was caused by the Japanese yen carry trade that spooked investors (unlikely anyone will remember this!).
Large-cap stocks like Nvidia, Tesla, and Amazon drove the market higher, all of which are AI-related. According to Seeking Alpha, if it wasn’t for Nvidia’s performance in the S&P 500, European stocks would have outperformed.
Another reason the market likely saw a steady trend higher is due to inflation trending lower, and the Federal Reserve began its easing cycle with interest rates in 2024. However, interest rates on the 10-year treasury, which impacts mortgage rates, have actually climbed after the Fed started cutting rates. This is likely due to the market already pricing in rate drops earlier in 2024, and then learning that the Fed may not cut as much in 2025 as originally expected. Rates not budging to the downside also likely means that the bond market sees inflation potentially staying higher for longer (or at least higher than anticipated earlier in the year).
Finally, a lot of Wall Street “experts” were completely wrong about how the market would potentially perform in 2024, and that’s far from the first time this has happened.
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For the 4th time in 5 years, most predictions were too pessimistic, meaning expectations were much more negative than how the market actually performed. So, the moral of the story is don’t make financial decisions based on predictions about what others think will happen in the future. Especially the big banks, many of which had predicted S&P 500 targets that turned out to be way off.
Instead, we suggest making a comprehensive plan based on sound financial principles that will help weather the volatility that results from economic and market fluctuations.
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Looking ahead into 2025
At The Clark Group Asset Management, we don’t make predictions about what can happen in the future or place targets on the market. We think that’s a fool’s errand because anything can happen that nobody expects. Instead, we take a holistic approach to each client’s financial plan, and in turn, their asset allocation for their portfolio. Our philosophy is that whatever happens in the market and economy, such as a recession, bear market of -30-50%, or even another bull run of +25%, your portfolio can weather all of the ups and downs to help you achieve your life goals.
With that being said, we do expect more volatility in 2025 than we experienced in 2024. Why?
The market just had two back-to-back years of over 20% gains, and at some point, it seems likely that the market will have a mean reversion given that the historical returns of stocks are closer to 10%, depending on the time frame. That doesn’t mean the market can’t continue trending higher, far from it.
Right now, the economy is showing positive signs and doesn’t seem likely to crack. Unemployment is near record lows, inflation is coming down, the Fed is cutting rates, and GDP is still growing. And just because the market has gone higher over the past 2 years does not mean it can’t continue that way for another few years without a bear market. But, a lot of good news has been priced into the market already. Interest rates coming down, the AI growth story, and potentially a Trump presidency being beneficial for the economy and taxes. In addition, there are some headwinds to consider such as potential tariffs with China and tensions with Russia, inflation resurging, and our country’s debt snowballing higher. That means that any negative news, like interest rates staying higher due to inflation being stickier, is going to impact the market. Also, if names like Nvidia have earnings below expectations, the market could potentially see a big decline.
Also, the average intra-year decline is close to -15%. We didn’t see that last year in 2024, the largest decline was just shy of -10%. That means that it seems imminent we will see a correction in the market throughout the year, especially given the run-up we’ve experienced over the past couple of years, which can actually be viewed as positive. You don’t want the market to continue going up and up, without any drops along the way, because that could lead to something much worse. Remember the tech bubble in the late 90s?
Anything can happen in the market and economy, but we are positive about the long-term growth of the US economy and stock market. We advise our clients to take a long-term perspective with their investments and tune out near-term noise from the media.
In addition, diversification is your best friend, especially as you enter retirement, and may need to tap into your portfolio to live off of. Some asset classes that have performed well over the past few years may not perform nearly as well over the next year, and vice versa.
We are keeping an eye on market trends, and as usual, we will keep you updated throughout the year. Don’t let the media worry you about market volatility, we recommend sticking to your plan!
If you have any questions about your portfolio or financial plan, please reach out to our team:https://www.clarkgroupam.com/schedule-a-call
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Sincerely,
The Clark Group Asset Management
Our "PROFIT" Process: https://www.clarkgroupam.com/our-process
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Disclosures: The Clark Group is an SEC Registered Investment Adviser. However, such registration does not imply a certain level of skill or training.? A copy of our current written disclosure brochures discussing our services, fees, and other important information is available upon request or at www.adviserinfo.sec.gov.
The information discussed in this article is strictly informational and is NOT intended to be financial advice or a recommendation to buy or sell any securities.? No investment and/or financial planning decision should be made based solely on the information contained in this newsletter. Certain information and data in the newsletter has been obtained from sources that we deem reliable, but we do not guarantee the accuracy.?
Past performance is not indicative of future results and investing involves risk, including the risk of loss of the principal amount invested.? . It should not be assumed that any investments made in the future will be profitable or will equal the performance discussed herein. Different types of investments involve varying degrees of risk, and there can be no assurance that any specific investment will either be suitable or profitable for your investment portfolio.
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The S&P 500? is widely regarded as the best single gauge of large-cap U.S. equities. The index includes 500 leading companies and covers approximately 80% of available market capitalization. An investor cannot directly invest in The S&P 500 index, instead, you can own an ETF that tracks the index. Tracking errors may apply to ETFs that track a specific index. Please consult your fiduciary financial advisor for more information.
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