December Recap and Looking Ahead to January
As 2024 came to a close, the markets experienced notable declines in December, reflecting investor caution and seasonal volatility. However, the broader performance for the year remained strong, underscoring the resilience of the economy and key sectors.
December Market Recap
Equities: The equity markets saw declines in December, with the S&P 500 falling by approximately 2.6%, and the Dow Jones Industrial Average dropping about 5.1%. In contrast, the Nasdaq Composite managed a modest gain of 0.6% for the month, buoyed by strength in technology stocks (AP News, StatMuse).
Fixed Income: Bond markets remained relatively steady as the Federal Reserve’s decision to hold rates steady provided some relief to investors. The 10-year Treasury yield ended the year at 4.15%, slightly down from November, as demand for safe-haven assets increased amidst ongoing geopolitical uncertainties.
Commodities: Oil prices hovered around $75 per barrel, reflecting balanced demand and supply conditions. Gold, a traditional hedge against inflation and market volatility, gained 1.5% for the month, benefiting from a weaker U.S. dollar.
Economic Indicators:
Labor Market: The labor market remained robust, with December’s job growth exceeding expectations. The unemployment rate held steady at 3.8%.
Inflation: Inflation trended lower, with the Consumer Price Index (CPI) rising 3.2% year-over-year, marking a continued decline from its peak in mid-2023.
Consumer Sentiment: Holiday spending exceeded forecasts, fueled by strong consumer confidence and resilient household finances, even as credit card balances grew.
January Market Outlook
Equities: As we enter 2025, the equity markets are poised for a cautious start. Investors will closely monitor corporate earnings reports for Q4 2024 to gauge the health of various sectors. Technology and renewable energy are expected to remain in focus, driven by innovation and supportive fiscal policies.
Fixed Income: The bond market’s trajectory will likely depend on signals from the Federal Reserve’s upcoming meeting. While the Fed has paused rate hikes, any indication of future tightening or easing will influence bond yields and investor sentiment.
Commodities: Commodity markets could see increased volatility in January, with energy prices influenced by geopolitical developments and weather conditions. Gold and other safe-haven assets may continue to attract attention if uncertainty persists.
Economic Indicators to Watch:
Federal Reserve Meeting: The Fed’s first meeting of 2025 will be pivotal in shaping market expectations for the year.
Inflation Data: January’s CPI release will provide insights into the effectiveness of the Fed’s policies and guide expectations for future rate moves.
Earnings Season: Corporate earnings reports will reveal how businesses navigated the economic landscape of late 2024 and provide clues for 2025 growth prospects.
Key Themes for January
Monetary Policy: Investors will remain focused on central bank policies, both in the U.S. and globally, as they assess the delicate balance between supporting growth and containing inflation.
Geopolitical Risks: Ongoing geopolitical tensions, particularly in Europe and Asia, may introduce volatility across asset classes.
Economic Resilience: While signs of slowing growth persist, the underlying strength of consumer spending and the labor market may provide a cushion for economic activity.
Final Thoughts
December’s declines serve as a reminder of the market’s inherent volatility, but the overall strength of 2024 highlights the importance of staying invested. As we look ahead to 2025, maintaining a diversified portfolio and a long-term perspective will be essential. Jackie and I will continue to monitor developments closely and adjust strategies to help our clients achieve their financial goals.
Sources: AP News, StatMuse, MarketWatch.