CEO Message
Happy New Year! As much as I love the holidays, as a creature of habit I have to admit I was more than ready to get back to a somewhat regular schedule this week. While we usually send out a monthly market recap, for this edition we’ll be recapping all of 2024. (Works out better that way anyway – there’s a lot of weird stuff that happens in December around tax-loss harvesting and closing short trades that makes it not very meaningful if you’re trying to get a broader view of how things are going.)
Trends, Triumphs, and Transformations
The S&P 500 had a total return of 25% for the year. That’s an absolutely outstanding performance not seen since…the year before, when it returned 26%. In short, if you’ve been invested in the stock market in the past few years you’ve done very well.
The two lines below tell the most important economic story of the year. Inflation (blue line) kept its downward trajectory long enough that the Fed finally felt comfortable cutting interest rates (dotted green line). While I was initially very skeptical, it appears they actually pulled off the much talked about “soft landing” where we don’t tip into a giant recession because of raised interest rates. The effect of those lowered borrowing costs are only now just beginning to ripple through the economy – though in some markets they haven’t budged at all (mortgage costs haven’t decreased yet, for instance.)
The Winners and Losers
In the market, tech made a big comeback after a couple of rough years since Covid. 2024 was a big year for tech. After a couple of rough years, AI really started to hit its stride, and businesses everywhere jumped on board. NVIDIA was the big winner, thanks to their AI chips that became a must-have for all kinds of applications. On top of that, renewable energy got a serious boost, thanks to government support and growing demand for sustainable solutions.
Information Technology and Telecommunications were the two best sectors of the year (led by the tech companies I just talked about). Materials, Healthcare and Real Estate were the worst, though notable none of them actually lost money (they just weren’t as good as their techbro friends).
Looking Ahead
Looking ahead to 2025, there are no immediate signs of concern. If inflation keeps dropping like we’ve seen recently, we should continue to see interest rates come down (even if they pause once or twice to digest news). That would be a huge relief for industries like housing, which has been feeling the pinch from high rates. As for tech, it’s still very much an AI story, but as more companies decide what to do with the technology, single stocks like Nvidia should become less important.
Politically things look to be much quieter than last year (duh), with the only real news looking to be what happens with the tax cut extension. It’s far too early to worry about that, but the early guess is that most of the important pieces get extended, and it’s just a matter of what else gets included in the bill. Once there’s a draft of a bill that might get voted on you can count on me to read through it on your behalf (likely with some assistance from a good bourbon).