New Year Update: 2024 Reflections & 2025 Expectations
As we step into 2025, I thought it would be beneficial to take a moment and reflect on what an extraordinary year 2024 was for investors.
Despite persistent concerns about the economy, inflation, and political uncertainty, the stock market delivered an impressive performance. The S&P 500 surged over 23%, marking back-to-back years of gains exceeding 20%—a feat we haven’t seen since the late 1990s.1
What were the factors affecting market performance?
One of the biggest drivers of this market success was the Federal Reserve’s shift to lower interest rates after years of aggressive tightening. Although rate cuts were gradual and fewer than anticipated, they provided meaningful support to market momentum. Mortgage rates dipped, borrowing costs eased, and hopes grew for a ‘soft landing’ rather than a recession.2
At the same time, U.S. economic growth outperformed expectations, with GDP expanding steadily throughout the year.3 Consumer spending remained resilient, and despite lingering inflation pressures, the economy proved remarkably durable.4
Of course, not all sectors shared equally in the market’s success. Technology stocks dominated the headlines, with the so-called “Magnificent Seven”—companies like Nvidia, Microsoft, and Apple—leading the charge.5 Artificial Intelligence remained the defining theme of the year, capturing investor enthusiasm and driving valuations to historic highs.6 Yet, as the year progressed, we saw broader market participation, with other sectors beginning to share in the rally.
Political and geopolitical events also influenced the year. Markets experienced volatility following the presidential election, initially surging on optimism before tempering gains as concerns about potential inflationary pressures emerged.7 Meanwhile, geopolitical tensions and uncertainty around the Federal Reserve’s future policy decisions added volatility throughout the year.8
What’s ahead for 2025?
Looking ahead to 2025, we’re entering a year of change and uncertainty. After such a significant market run, expectations for continued outsized gains are more tempered. Analysts are cautiously optimistic, forecasting more modest market growth this year.9
As a financial advisor, my role is not to predict market outcomes—it’s to prepare and adapt my clients’ financial strategies no matter what 2025 brings. Whether it’s economic shifts, political changes, or market volatility, I’ll be here to help navigate it all.
If you have any questions, please don’t hesitate to reach out.
Sources:
1. AP News
2. Trading Economics
3. Trading Economics
4. Trading Economics
5. Yahoo Finance
6. Morningstar
7. US News
8. Federal Reserve
9. Morningstar
Risk Disclosure: Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values.
Any company names noted herein are for educational purposes only and not an indication of trading intent or a solicitation of their products or services. LPL Financial doesn’t provide research on individual equities. Because of their narrow focus, investments concentrated in certain sectors or industries will be subject to greater volatility and specific risks compared with investing more broadly across many sectors, industries, and companies.
Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.
This material is for information purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security. The content is developed from sources believed to be providing accurate information; no warranty, expressed or implied, is made regarding accuracy, adequacy, completeness, legality, reliability, or usefulness of any information. Consult your financial professional before making any investment decision. For illustrative use only.
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