US stocks are poised to achieve a remarkable milestone that has only occurred a few times in history. The S&P 500 is on track to post a gain of over 20% this year, following a 24% increase in 2023. If it manages back-to-back gains of over 20%, it would mark the best performance for the index since 1997 and 1998, based on data from FactSet. This would be an exceptional event for the current version of the index, as similar gains were recorded in 1927 and 1928, 1935 and 1936, and in 1954 and 1955, according to a Bank of America analysis. Despite a slowdown in December and the absence of an anticipated “Santa Claus rally” to end 2024, the markets had a standout year, building on the strong performance seen in 2023. Wall Street witnessed impressive returns fueled by subdued inflation, robust consumer spending, and a solid albeit slowing job market. Investors were optimistic about the tech sector’s earnings growth and stocks saw a surge after President-elect Donald Trump’s reelection in November. The Dow index rose over 12% this year, while the Nasdaq index, dominated by tech companies, gained over 31%. The S&P 500 has risen nearly 60% over the past two years, rebounding from a poor showing in 2022 when it dropped by 20%. US markets outperformed European and Asian stocks throughout the year. According to Terry Sandven, chief equity strategist at US Bank Wealth Management, factors such as diminishing inflation, ongoing interest rate cuts, and rising earnings have boosted sentiment and provided support for valuations. Analysts predict continued growth in 2025 driven by strong economic data, earnings expansion, and expectations of favorable policies under the Trump administration. While the consensus points to a 14.8% increase in the S&P 500 in 2025, some analysts caution that stocks may be overvalued, and uncertainties around future rate cuts by the Federal Reserve and geopolitical risks could trigger a market downturn. Despite the recent gains, there are concerns about the sustainability of the bull market. In December, the S&P 500 and Nasdaq experienced their worst performance since April, with tech stock selloffs weighing down the indices. Achieving three consecutive years of 20% gains in the stock market is rare, and there are mixed opinions about the market outlook for the upcoming year. The Fed started cutting interest rates in September, following a period of holding rates at high levels since the summer of 2023. The combination of rate cuts and strong economic growth has been favorable for US equities. However, the Fed’s indication of fewer cuts in 2025 than previously anticipated could dampen market momentum next year. US tech companies had a stellar year, propelling the S&P 500 to significant gains.
The performance of seven major tech stocks, known as the “Mag Seven” – Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia, and Tesla – has significantly impacted the S&P 500 this year. These companies have collectively contributed over 50% of the index’s total returns, with their influence growing to over 96% since November 5, as per data from S&P Dow Jones Indices. Notably, Nvidia (NVDA) stood out as a top performer, witnessing a remarkable surge of over 180%.
However, despite the strong showing of big tech stocks, the broader stock market has seen a lackluster breadth, with most companies within the S&P 500 experiencing declines since November. The market has been propped up by the gains made by the Mag Seven, as reported by S&P Dow Jones Indices.
In terms of major indices, the Dow Jones Industrial Average is poised to close the year with a more than 12% gain. The blue-chip index reached a record high above 45,000 points on December 4 but retraced by 5% later in the month. Notably, American chipmaker Nvidia became a part of the Dow in November.
The Nasdaq Composite, primarily composed of tech stocks, is set to end the year with a substantial increase of over 31%. This performance has been driven by investor confidence in technology and artificial intelligence (AI). Noteworthy additions to the Nasdaq this year include Palantir (PLTR), an AI-focused data company that saw its stock surge by nearly 370%.
The US Treasury market has signaled expectations of future economic growth and inflation, with the 10-year and 2-year Treasury note yields sliding to 4.539% and 4.252%, respectively. The US dollar strengthened towards the end of the year, buoyed by economic growth prospects post-Trump’s reelection in November. The US dollar index, a measure of the dollar against other currencies, showed a gain of over 6% for the year.
In the realm of cryptocurrencies, Bitcoin traded around $92,000 at the time of reporting, posting a significant increase of over 100% in 2024. This surge contrasts with its value two years ago when it plummeted below $17,000 amid industry challenges. Bitcoin’s rally this year has been partly attributed to growing mainstream acceptance, including Trump’s support for cryptocurrencies.
Gold experienced a notable uptrend, rising by more than 26% and outpacing the S&P 500. Investors often turn to gold as a safe-haven asset during economic uncertainties and inflationary periods. Central banks worldwide bolstered gold reserves, contributing to the metal’s rally.
Among commodities, cocoa futures on the New York exchange saw a remarkable surge of almost 200% due to supply disruptions caused by climate issues affecting cocoa harvests in Ghana and the Ivory Coast. Futures prices for coffee and orange juice also rose due to climate-related challenges and pessimistic harvest outlooks.
