December Market Recap
Short term pain. Long term gains.
Stock prices drifted lower in December, driven in part by the Federal Reserve’s outlook for fewer rate cuts in the year ahead. The S&P 500 fell 2.5% in just its third negative month of the calendar year. The Dow Jones Industrial Average performed even worse, losing 5.3%. The NASDAQ was an exception, gaining 0.5% as technology stocks proved more resilient.
Eight of the 11 sectors in the S&P 500 booked monthly losses and all of those were down 5% or more. Materials (-10.9%), Energy (-9.6%) and Real Estate (-9.2%) were hit hardest. Communication Services (+3.5%), Consumer Discretionary (+2.3%) and Technology (+1.1%) each managed moderate gains.
Benchmark Returns: December 2024 | YTD 2024
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Dow Jones
|
S&P 500
|
NASDAQ
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-5.27% | +12.88%
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-2.50% | +23.31%
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+0.48% | +28.64%
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|---|
Despite a down-month in December, 2024 was another exceptionally strong year for US equities. The S&P hit 57 new highs during the calendar year, fifth most in history. The index increased more than 23% (not including dividends). It is fourth time in the last six years that the S&P 500 has gained 20% or more.
Some trends worth mentioning: Growth stocks outperformed Value stocks by 19% in 2024. This follows Growth’s 31% outperformance in 2023. That is the largest margin of 2-year outperformance since 1998-99.
The cap-weighted S&P 500 (the one referenced most often in the media) outperformed the equal-weighted S&P by more than 12% in 2024. Cap-weighted also outperformed by 12.4% in 2023.
The S&P 500 returned more than 4x as much as international equities (+5.3%) in 2024. All these trends are evidence of the massive influence that mega-cap technology stocks have on total market performance. The biggest seven names in the S&P 500 – Apple, Nvidia, Microsoft, Amazon, Alphabet, Meta, Tesla – now comprise more than 33% of the index.
Back to the December news…
Equities traded mostly sideways until December 18, when the Fed cut interest rates and adjusted its 2025 policy outlook. The 0.25% cut was expected, but the Fed’s revised guidance indicated fewer rate cuts are coming in 2025 than previously expected.
Stocks reacted by selling off. The Dow sank 1,123 points while the S&P 500 lost 3%. December 18 would up being one of 10 consecutive down-days for the Dow, the longest such streak since 1974.
The Consumer Price Index rose higher for the second month in a row. CPI revealed year-over-year inflation of 2.7% (up from 2.6% in October and 2.4% in September).
With inflation concerns lingering, bond yields rose higher. Ten-year US Treasuries ended the year yielding 4.57%, compared to 4.18% a month earlier. Bond yields have not been this high since May.
Third-quarter GDP was revised higher to 3.1% annualized, up from initial estimates of 2.8%. US economic growth has topped 2% annualized for eight of the last nine quarters.
International equities performed similarly to US stocks in December. The MSCI EAFE Non-US Developed index fell 3%. Emerging Markets were down 1.7%.
Small cap equities had a dismal month. The Russell 2000 fell 8.4% and gave back most of its gains from a month earlier.
Ben Marks
Chief Investment Officer
Brett Angel
Senior Wealth Advisor
Investment Advice offered through Marks Group Wealth Management, a Registered Investment Advisor.
Marks Group Wealth Management performs in-house analysis on companies. Statistical information on mentioned companies is obtained from company reports, news releases and SEC filings. The information set forth herein has been derived from sources believed to be reliable, but is not guaranteed as to accuracy and does not purport to be a complete analysis of the securities, companies or industries involved. Opinions expressed herein are subject to change without notice. Additional information is available upon request.
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Stock investing involves market risk including loss of principal. Bonds are subject to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rates rise. International and emerging market investing involves special risks such as currency fluctuation and political instability. These risks are often heightened for investments in emerging markets. No strategy assures success or protects against loss. Because of their narrow focus, sector investing will be subject to greater volatility than investing more broadly across many sectors and companies.
Past performance is no guarantee of future results. All indices are unmanaged and may not be invested into directly.
The Standard & Poor’s 500 Index is a capitalization weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.
The NASDAQ Composite Index measures all NASDAQ domestic and non-U.S. based common stocks listed on The NASDAQ Stock Market. The market value, the last sale price multiplied by total shares outstanding, is calculated throughout the trading day, and is related to the total value of the Index.
The Dow Jones Industrial Average is comprised of 30 stocks that are major factors in their industries and widely held by individuals and institutional investors.
Russell 1000 Growth Index measures the performance of those Russell 1000 companies with higher price to-book ratios and higher forecasted growth values.
Russell 1000 Value Index measures the performance of those Russell 1000 companies with lower price-to-book ratios and lower forecasted growth values.
The Russell 2000 Index is an unmanaged index generally representative of the 2,000 smallest companies in the Russell Index, which represents approximately 10% of the total market capitalization of the Russell 3000 Index.
MSCI EAFE Index consists of the following developed market country indices: Australia, Austria, Belgium, Denmark, Finland, France, Germany, Hong Kong, Ireland, Israel, Italy, Japan, the Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, and the United Kingdom.
The MSCI Emerging Markets Index is a free float-adjusted market capitalization index that is designed to measure equity market performance of emerging markets.
VIX-The Chicago Board Options Exchange’s CBOE Volatility Index, a popular measure of the stock market’s expectation of volatility based on S&P 500 index options. It is calculated and disseminated on a real-time basis by the CBOE, and is often referred to as the fear index or fear gauge.
