As we approach the end of 2024, it’s a fitting time to reflect on the key economic and market developments that defined this year. The U.S. economy showed notable resilience and strength, while the financial markets delivered impressive returns across the board.

The Economic Landscape

One of the drivers of this year’s economic stability was the Federal Reserve’s monetary policy adjustments. To support growth and ease borrowing costs, the Fed implemented a series of interest rate cuts. The most recent cut in November brought the federal funds rate to a range of 4.50% to 4.75%, offering relief to borrowers in sectors like housing, auto loans, and business financing. (I am writing this on December 16th, and another cut is widely anticipated on the 18th).

Lower rates also boosted investor confidence, contributing to strong stock market performance in the second half of the year.

On the inflation front, 2024 brought much-needed stabilization. Over the past 12 months, consumer prices rose by 2.6%, a significant improvement from the previous year. Notably:

• Energy costs declined, offering relief to both households and businesses.
• Wage growth outpaced inflation in the latter half of the year, improving consumer purchasing power.

At the same time, the labor market remained strong, with low unemployment rates and healthy job creation. Employers continued to hire, and wage growth accelerated, helping workers stay ahead of rising prices. Together, job stability and higher wages supported consumer spending, a critical driver of economic momentum.

Stock Market Performance

The stock market delivered impressive results in 2024, with major indexes posting substantial gains:

• S&P 500: Up 28% year-to-date, achieving numerous record highs.
• NASDAQ Composite: Surged 37%, driven by strength in technology and communication services.
• Dow Jones Industrial Average: Increased by 16%.
• Russell 2000: Gained 18%, reflecting strength in smaller-cap stocks.

Top-Performing Sectors

The financial sector led all industries in 2024 with a total return of 37.9% YTD. Performance was supported by:

• Economic Recovery: Increased lending activity and higher financial services fees.
• Stronger Balance Sheets: Financial institutions maintained robust balance sheets, enabling growth and resilience.

In second place was communication services, up 36.5% YTD. This sector benefited from advancements and robust consumer demand, driven by:

• AI Advancements: Artificial intelligence significantly improved digital advertising, boosting revenues for companies like Meta Platforms and Alphabet.
• Strong Consumer Spending: Increased engagement and ad revenue bolstered interactive media and services.
• Investor Enthusiasm: Mega-cap growth stocks saw strong investor interest, fueled by optimism around long-term AI-driven growth.

The utilities sector gained 33.8% YTD. The strong rebound from 2023 was due to:

• Falling Interest Rates: Lower rates made utilities, with their reliable dividends, more attractive to investors.
• Rising Electricity Demand: Growing adoption of electric vehicles and data center expansion drove electricity consumption.
• Transition to Renewable Energy: Investments in renewable energy sources enhanced growth prospects for the sector.

Notably, all sectors finished 2024 in positive territory, with all but healthcare achieving double-digit gains—a testament to the strength of this year’s market rally.

Looking Ahead

In 2024, the economy struck a balance between growth, stability, and opportunity. Inflation moderated, interest rates fell, and the labor market stayed resilient, allowing markets to flourish and consumers to thrive.

As we look ahead to 2025, we remain optimistic, but cautious, about the opportunities that lie ahead. Your continued trust is at the heart of our success, and we look forward to navigating the markets together in the coming year.

Wishing you and your families a happy, healthy, and prosperous New Year!

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