S&P 2024 Recap

in LeoFinance4 months ago

We’ve officially entered 2025, and looking back at last year, the S&P 500 delivered one of the most remarkable performances in its history. With gains of 23.3% in 2024, the index exceeded all expectations, setting new records and delivering extraordinary results ( In stock standards ).

To put it simply, the total market capitalization of the 500 largest U.S. companies grew by a staggering $10 trillion, surpassing $50 trillion!

And if that wasn’t enough, this growth followed an already strong 2023, when the market rose by more than +24%.

But what drove the markets to such heights?

2024 REVIEW

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So, 2024 wrapped up with the S&P 500 at 5,881.63 points, marking a 23.3% rise! In fact, this is the first time since 1998 that the index has achieved back-to-back years of over 20% gains.

For the number enthusiasts like me, let’s look at some of the year’s highlights:

  • The index surpassed the 5,000 and 6,000 marks for the first time.

  • Its best streak? Two consecutive seven-day winning runs, while its longest losing streak was six days.

  • The lowest point was 4,682.11 on January 5th, while its peak hit 6,099.97 on December 6th.

And what about the best and worst months? Well, the best monthly performance was in November (+5.73%), while the worst drop occurred in April (-4.16%). As you can tell, 2024 was marked by plenty of volatility, but also incredible opportunities!

What Powered the 2024 Surge?

The S&P 500’s stellar 2024 performance was driven by three key factors:
(a) the Federal Reserve’s monetary policy,
(b) the tech sector’s explosion due to artificial intelligence (AI), and
(c) political developments in the U.S. Let’s dive deeper into each of these drivers.

  1. The Economy and FED Policy
    2024 marked the beginning of interest rate cuts by the Federal Reserve, providing a boost to markets. Inflation, which had been a concern in 2022 and 2023, fell significantly, nearing the 2% target by the first half of the year.

However, the second half of the year saw stagnation in the Personal Consumption Expenditures (PCE) price index, the FED’s preferred inflation measure. Meanwhile, the labor market showed signs of easing, with FED Chair Jerome Powell noting that conditions had become "looser" compared to pre-pandemic levels.

The result? Three rate cuts in total—September, November, and December—brought interest rates down by 100 basis points (1%).

  1. Tech and Artificial Intelligence (AI)
    The tech sector was the big winner of 2024, with AI investments propelling the Magnificent 7 stocks. “Oh, Nvidia carried them all? Exactly! Nvidia , a leader in AI chip production, saw its stock soar by 178%!

This surge made Nvidia one of the world’s largest companies by market capitalization.

The rest of the Magnificent 7 also performed exceptionally well: Microsoft gained +13%, Apple +31%, Alphabet +37%, Amazon +46%, while Meta and Tesla each jumped +67%.

In short, the AI craze ushered in a new era for the tech sector, rewarding companies leading innovation. Despite high valuations raising some concerns, most analysts agreed that these firms were backed by strong profitability and genuine growth potential. So yes, folks, in case you’re wondering, this isn’t a bubble!

  1. Trump’s Reelection
    Lastly, the most recent event that gave markets a significant push was Donald Trump’s reelection in the November presidential election, which sparked a 7% rally in the S&P 500 from election day to year’s end!

Why was Trump’s reelection so impactful? The policies supported by the Trump administration filled markets with optimism because:
(a) investors expect lower corporate taxes,
(b) deregulation is anticipated to boost business activity, and
(c) tariffs and trade policies might benefit certain sectors of the U.S. economy.

2025

2025 will be a tricky year. Everyone is expecting a correction because the S&P's numbers feel like a bubble. At the same time, U.S. companies are reporting exceptionally strong revenues and profits. In my view, we need to be cautious—speculators are lurking, ready to pounce on even the slightest bad report to pull the rug out.

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Given the significant gains in 2024 but balanced with concerns about market volatility and potential overvaluations, investors should consider several strategic areas of focus for 2025. Here are valuable investment themes and sectors to watch:

  1. Continued Investment in Technology, Especially AI:

While there are concerns about high valuations in the tech sector, artificial intelligence continues to be a transformative force. The growth trajectory for AI seems sustainable, given the ongoing advancements and integration in various industries. Companies that lead in innovation, particularly those involved in AI development and application, are likely to perform well. However, selectivity will be crucial to finding stocks with room for growth at reasonable prices.

  1. Sectoral Rotation and Diversification:

Considering potential volatility, a strategic approach would be to diversify across sectors that might benefit from different economic conditions. Areas such as healthcare, which is relatively recession-proof, or renewable energy, which is a beneficiary of supportive governmental policies globally, might provide good counterbalances to tech-heavy portfolios.

  1. Financials and Consumer Discretionary Sectors:

Financials: If interest rates stabilize or increase, financial institutions could benefit. Banks and financial services often perform well in a rising rate environment, which increases their net interest margins.
Consumer Discretionary: This sector could benefit from continued economic growth and consumer spending. However, the performance might be closely tied to economic indicators and consumer confidence levels.

  1. Monitoring Political and Economic Policies:

With President Trump’s re-election, tracking policy changes, especially those related to taxes, trade, and regulation, will be critical. Pro-business policies could continue to drive market optimism, but any shifts or new geopolitical tensions need to be watched for their potential to disrupt markets.

  1. Defensive Stocks:

Given the potential for a market correction, investing in defensive stocks—those providing consistent dividends and stable earnings regardless of economic conditions—can protect against volatility. Utilities, consumer staples, and healthcare are typically considered defensive sectors.

  1. Geographical Diversification:

Looking beyond the U.S. markets to emerging markets might also provide growth opportunities. These regions like Africa and South America could benefit from quicker economic recovery trajectories and less saturated markets.

  1. Sustainability and ESG Investing:

ESG (Environmental, Social, and Governance) factors continue to be a critical focal point for investors. Companies with strong sustainability records are increasingly favorable for long-term investment due to growing regulatory requirements and consumer preferences shifting toward responsible businesses. Be vigilant about green investment initiatives, they are the gift that keeps giving. “Carbon credits”

That is really extensive thank you mate !!

I think it's been almost two years now that I've been hearing financial experts who keep saying that the S&P500 will have a huge collapse. At this point I really think that it could be a scenario that reveals itself soon. Of course it's true that those who have not invested in this index in these two years have really missed a huge opportunity for profit. The percentage of profit that this index has made in 2024 is very interesting, thanks for informing us.

Yes there will always be doomsayers that are waiting for the markets to crash to say i told you so

That's a decent rise. I wonder how much we could have all made had we invested!

I believe 15% returns would be great for 2024 since no one can enter the bottom and exit in the top

Yes 2024 has been a great year for investors in the US Stock Market. Especially the Mag7 ran very well.
I am one of those expecting a correction within the next 12-18 months though maybe we won’t get a bigger one if everyone thinks so. We will see.

Yes we have to be careful in 2025

I appreciate your restrained view on 2025 as it is more grounded to the reality compared to just the artificial hype that is floating in social media.

Yes Euphoria cannot continue forever and despite the great results from the big companies investors and traders must take profits.

I find it ironic that the current president elect ran on a platform that emphasized how dreadful the economy was. And yet...everyone is pointing to a robust U.S. economy.

Don't get me wrong. I think what Biden and those around him did in hiding his cognitive defects was almost criminal. There should have been an open primary. The way should have been cleared for a more viable (more cognitively robust) nominee. As it turned out, he wasted a year, and then handed us the only candidate that could realistically take his place (she had been on the ballot and therefore was able to use campaign funds).

If we had had a more viable candidate, who could have placed a distance between him/herself and the less popular Biden policies, there might be a Democrat taking the oath of office on Jan. 20.

As for lower corporate taxes...good luck with that. All money bills must originate in the House and the Republicans have the narrowest of majorities. There are fiscally conservative Republicans in the House who will not be eager to increase expenditures (lowering taxes is the same as increasing expenditures...result is a net deficit).

OK, so you probably weren't looking for this extended comment, but the vote for Speaker of the House was held today so I am feeling a bit political.

Happy New Year, @steemychicken1

 4 months ago Reveal Comment

Thanks !!