Market Wrap – December 2024
This is a brief review with a focus on key trends. More detailed information, including macroeconomic statistics and key events, is presented in the weekly reviews.
Executive Summary
US Stock Market: In December, the U.S. stock market gave back much of November’s gains as reduced expectations for Federal Reserve rate cuts dampened risk appetite. Large Growth, led by the "Magnificent 7," was the only segment to end the month in positive territory. These tech giants dominated for a second consecutive year, contributing 56% of the S&P 500’s annual market cap growth, following a similar 62% contribution in 2023.
The S&P 500 closed 2024 with a 23.3% annual gain, building on its 24.2% rise in 2023. JPMorgan Asset & Wealth Management noted that consecutive double-digit annual gains are rare, occurring only 10 times since 1871, with sustained third-year growth limited to the bull markets of the 1990s and the Roaring Twenties.
Cryptocurrencies: The cryptocurrency market saw a 4.5% decline in capitalization in December, with Bitcoin falling 3.2% after hitting an all-time high of $108,315 mid-month, driven by optimism following Donald Trump’s election win. U.S.-based Bitcoin ETFs experienced $1.8 billion in net outflows after December 19, reflecting cooling sentiment. Institutional interest also faded, with open interest in CME Bitcoin futures dropping nearly 20% from its peak. Despite the December pullback, Bitcoin posted a 120% gain for the year, far outperforming gold and global equities.
Sector Performance: The Consumer Discretionary sector was the only one to post gains in December, propelled by Tesla’s continued rally.
Global Stock Markets: Global markets adopted a "risk-off" sentiment, with the global ex-U.S. index declining nearly 3% in December. For the year, the U.S. stock market returned +24%, compared to just +5% for the rest of the world in dollar terms.
Monetary Policy and Bond Market: An unexpectedly hawkish stance from Federal Reserve officials, who reduced the number of projected rate cuts for 2025, prompted traders to reassess the timeline for future monetary easing. Projected end-of-year Fed rates for 2025 increased by 12 basis points compared to November, further supported by strong economic data and slower-than-expected inflation. As a result, the U.S. Treasury yield curve steepened significantly. The 10-year bond yield rose by 40 basis points to 4.58%, while the 30-year bond yield climbed by 42 basis points to 4.78%.
US Stock Market
In December, the U.S. stock market reversed much of November’s gains as reduced expectations for Federal Reserve rate cuts dampened investor appetite for riskier assets. The only segment that ended the month in the green was Large Growth, dominated for the second consecutive year by the "Magnificent 7." This cohort of tech giants significantly skewed the broader picture, accounting for 56% of the annual growth in the S&P 500’s market cap, following a similar 62% contribution in 2023.
The S&P 500 closed out 2024 with a 23.3% gain, building on its 24.2% rise in 2023. According to JPMorgan Asset & Wealth Management, such back-to-back gains are rare, occurring only 10 times since 1871. Sustained growth into a third year has only happened during the bull market of the 1990s and the Roaring Twenties.
The cryptocurrency market experienced a 4.5% decline in capitalization, with Bitcoin falling 3.2%. This correction followed a surge to an all-time high of $108,315 in mid-December, driven by optimism surrounding President-elect Donald Trump’s victory. U.S.-based Bitcoin ETFs saw net outflows of $1.8 billion after December 19, reflecting cooling sentiment. Institutional interest also waned, with open interest in Bitcoin futures at CME Group declining nearly 20% from its December peak. Despite the correction, Bitcoin posted an impressive 120% gain for the year, significantly outperforming gold and global equities.
For the second consecutive year, the large-cap growth segment outperformed small- and mid-cap segments, with the divergence becoming even more pronounced in 2024.
Only the Consumer Discretionary sector posted gains, driven by the continued rally in Tesla stock.
According to our calculations, the Magnificent 7 accounted for 56% of the year-to-date growth of the S&P 500 Index, up from 44% a month ago. In relative terms, the market cap of these stocks rose by 47.7%, while the value of the remaining 493 stocks increased by 14.9%. In November, these figures were 42.1% and 21.4%, respectively.
Global Markets
Global stock markets largely shifted to a "risk-off" sentiment, with the global ex-U.S. index losing almost 3% in December. Annual performance highlights a stark contrast: the U.S. stock market returned +24%, while the rest of the world posted just +5% in dollar terms.
Debt and Fixed Income Markets
According to CME data, the implied Fed Funds rate curve for the next 18 months (through June 2026) shifted upward by an average of 7 basis points. Notably, the rate is now expected to plateau in December 2025, compared to April 2026 as projected a month ago.
The U.S. Treasury yield curve steepened significantly, with 10-year bond yields rising 40 basis points to 4.58% and 30-year bond yields climbing 42 basis points to 4.78%. This movement followed an unexpectedly hawkish stance from Federal Reserve officials, who reduced the number of projected rate cuts for 2025. Strong economic data and slower-than-expected inflation further reinforced the Fed's cautious outlook.
You can find more articles in our Telegram channel at https://lnkd.in/euxNeUuZ