Market Recap: December 2024

Market commentary

• The U.S. economy presented mixed signals in December with both the Consumer Price Index (CPI) and unemployment creeping slightly higher.
• Walking a tightrope between their goals of maximum employment and price stability, the Fed cut interest rates at their December meeting by 25 basis points.
• Although Consumer Confidence declined in December, consumer spending continues to drive the economy.
• Elevated geopolitical tensions, both domestic and foreign, continue to keep financial markets on edge. 

Select economic and market data

Equities

• Stocks stumbled across the finish line with three straight days of sizeable losses at year end. However, 2024 returns remained robust, especially for domestic indices.
• Company earnings remain strong, and equity valuations continue at high levels, suggesting a generally positive outlook for both the market and the economy.

Fixed income

• Despite the 25-basis-point rate cut by the Federal Reserve, U.S. bond yields rose in December, especially in longer maturities as the 10-year Treasury yield climbed by 40 basis points.
• Higher rates led to mostly negative returns in bonds, with only T-Bills offering positive December performance among those indices shown below.

Strategic outlook

• Some near-term caution warranted on equities, particularly in high-growth large-cap stocks following a period of significant outperformance; currently favoring small- and mid-cap domestic stocks longer-term.
• Above-average volatility is likely given central bank involvement and geopolitical uncertainty.
• Near-average expected returns projected for fixed income after period of rising rates and bond market sell‐off.