Stock Market Surprises Investors Again in 2024

NEW YORK -- What a wonderful year 2024 has been for investors.

U.S. stocks surged and propelled the S&P 500 to new record highs as the economy continued its growth and the Federal Reserve made the decision to lower interest rates.

This year showcased familiar standout performers, especially in technology, where major firms expanded their market presence. However, the success wasn't limited to just tech giants like Apple and Nvidia. Other investments, such as Bitcoin and gold, also saw significant increases.

Let's break down some key numbers that shaped this remarkable year, with data as of December 20.

Do you remember significant events, like when President Bill Clinton was impeached or when Mark McGwire hit his 70th home run? Those were the last times the stock market closed out a year with a growth of at least 20% for two consecutive years. This year, the S&P 500 is on track to achieve that once more, showing a gain of 24.3% thus far, following last year's gain of 24.2%.

The S&P 500 has set a remarkable number of all-time highs this year. The first record was established on January 19 as the index completed a two-year recovery from declines caused by inflation and concerns over the potential for a recession due to rising interest rates. Throughout the year, the index consistently set new records, missing only in April and August, with the latest peak occurring on December 6.

The Federal Reserve cut its main interest rate several times this year, which provided relief to the economy. The central bank's decisions were influenced by expectations of further cuts and optimism for the future. However, the total reduction of 1 percentage point fell short of the predicted 1.5 percentage points many expected at the year's start. In December, the Fed created uncertainty by suggesting that only two more cuts might occur in 2025, disappointing some investors.

A significant market movement happened the day after Election Day, leading the Dow Jones Industrial Average to rise substantially. Investors responded positively to the implications of Donald Trump’s potential return to the White House. The S&P 500 enjoyed a 2.5% increase, marking its best trading day in almost two years. There was excitement for not just Bitcoin but also for bank stocks and smaller companies that were viewed as likely beneficiaries. However, this enthusiasm has since waned due to concerns that Trump’s policies may drive inflation higher.

Bitcoin reached a new record high of over $108,000 this past month, fueled by decreasing interest rates and an emergence of positive sentiment following Trump's election. He has since expressed support for cryptocurrencies and appointed a former regulator seen as favorable to the crypto industry as the new chair of the Securities and Exchange Commission. Just two years ago, Bitcoin was valued at under $17,000 amidst the fallout from the FTX cryptocurrency exchange collapse.

Gold also performed exceptionally well this year, achieving records alongside U.S. equities. The demand for gold surged amid global conflicts, as it is considered a safe investment. Additionally, the Fed’s interest rate cuts made gold more appealing, as lower bond yields resulted in fewer investors being drawn away from gold, which does not generate any income.

In December, Tesla's stock price surpassed a notable threshold, which has significance within the industry. Tesla's shares, which began the year below $250, saw substantial gains partly due to expectations that CEO Elon Musk's relationship with Trump could favor the company.

Nvidia reported significant revenue of $39 billion for the first nine months, driven by the AI boom. Its impressive earnings reflect the rising demand for their chips, placing the company's valuation at over $3 trillion.

In developments related to retail, GameStop experienced an increase in its stock price after influencer Keith Gill, known as “Roaring Kitty,” publicly supported the company. This event sparked interest in several other meme stocks as well.

On the economic front, the U.S. economy expanded by 5.5% in the first quarter, 6.2% in the second quarter, and 7.1% in the third quarter. These growth figures surpassed expectations set during a time of high inflation. The Fed's interest rate increases had many predicting a recession. However, the overall economy has shown resilience, even though lower-income households continue to feel the pinch from elevated prices.

On a less positive note, the vacancy rate for U.S. office spaces reached an all-time high. This stability was considered a win for property owners, given the increases seen since the onset of remote work during the pandemic.

Lastly, as of November, the total number of existing homes sold in the U.S. was 4.09 million. December would need to see a 20% surge in sales year-over-year to match last year's figures, as the housing market has struggled since 2022, primarily due to rising mortgage rates and a shortage of available homes.

Stocks, Economy, Investors