Stocks just did something they haven’t done in nearly three decades

New York
CNN
—

US markets ended a blockbuster 2024 by marking a performance so rare that it has only happened a handful of times.

Despite U.S. stocks closing lower Tuesday on a disappointing December, with the Dow down more than 2,000 points, or about 5%, and the S&P 500 down 2.5%, this was a great year for stocks.

S&P 500 rose more than 23% this year after rising 24% in 2023. The back-to-back gains of more than 20% are the best performance for the benchmark index since 1997 and 1998, according to FactSet data.

It is an extraordinary event for the modern version of the index. (Forerunners also accomplished that kind of feat three other times, in 1927 and 1928, 1935 and 1936, and in 1954 and 1955, according to a Bank of America analysis.)

This means that your retirement savings may look a little more muted than usual. Retirement plans in the form of a 401(k) or other retirement fund are often invested in indexes like the S&P 500. So when stocks have a standout year, your account balance will benefit.

Despite shower out in December and missing an expected “Santa rally” to close out 2024, markets achieved a blockbuster year and built a strong 2023.

Wall Street saw impressive returns this year as inflation eased and consumer spending remained strong, while the labor market proved solid but slowing. Investors were positive about strong earnings growth for tech companies, and stocks rose after the re-election of President-elect Donald Trump in November.

The blue-chip Dow is up 12.9% this year, while the tech-heavy Nasdaq is up 28.6%.

The S&P 500 is up about 53% over the past two years after a poor performance in 2022, where index drop 20%.

US markets have also outperformed stocks in Europe and Asia this year.

“Inflation is easing, interest rate cuts are underway and earnings are rising, all of which are boosting sentiment and supporting valuations,” said Terry Sandven, chief equity strategist at US Bank Wealth Management.

The consensus among major banks and research analysts appears to be continued growth into 2025 amid strong economic data, earnings growth and expectations of a business-friendly Trump administration. Analysts expect the S&P 500 to rise 14.8% in 2025, according to FactSet.

But some analysts say stocks are currently overvalued, and uncertainty about the pace of future interest rate cuts by the Federal Reserve as well as looming geopolitical risks could trigger a sale. With such eye-popping gains in the past two years, it is uncertain whether the bull market can last.

“We believe the chances for another positive year in 2025 are favorable given the high likelihood of economic growth and a Fed likely to cut interest rates next year,” said Jeffrey Buchbinder, chief equity strategist at LPL Financial. December 30 memo. “However, if resurgent inflation takes rate cuts off the table or speculation gets out of hand, this bull market may struggle to make it through next year.”

December was the worst month since April for the S&P 500 and Nasdaq, according to data from FactSet, which divestment in technology stocks pulled the indices lower.

In fact, it’s rare to see three consecutive years of 20% gains in the stock market, according to Callie Cox, chief market strategist at Ritholtz Wealth Management.

“Everybody expects a good year next year, and that leaves plenty of room for disappointment,” Cox told CNN.

In September, the Fed began cutting interest rates after holding them at decade highs since the summer of 2023. The combination of the Fed starting to cut interest rates and strong economic growth boded well for US stocks.

Cooling inflation boosted investor optimism, but after the year’s final policy meeting, the Fed signaled that there will be fewer cuts in 2025 than previously expected, which could undermine market momentum next year.

S&P 500 index: US technology companies had a stellar year, and the S&P 500 rose 23.3%.

The “Magnificent Seven” of tech stocks — Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia and Tesla — have accounted for more than 50% of the S&P 500’s total return this year, according to data from S&P Dow Jones Indices.

And since November 5th, Mag Seven shares have accounted for over 96% of the S&P 500’s gains. Nvidia (NVDA) the stock was one of the best performers of the year, rising 179%.

While Big Tech stocks led the gains, the stock market breadth has been thin. Most companies in the S&P 500 have fallen since November, while the index has been helped by the Magnificent Seven’s gains, according to S&P Dow Jones Indices.

Dow Jones Industrial Average: The Dow rose 12.9% for the year. The blue-chip index peaked at a record just above 45,000 points on Dec. 4 before falling 5% in December.

American chipmaker Nvidia joined the Dow in November.

Nasdaq Composite: Nasdaq rose 28.6% in 2024. The tech-heavy index was the star of the major indexes, rising on investor confidence in technology and artificial intelligence.

Palantir (PLTR), the AI-focused data company whose stock rose nearly 340% this year, joined the Nasdaq in December.

US government bonds: The yield on the 10-year US Treasury note rose to 4.57% on Tuesday. The yield on the 10-year US Treasury rose by over 15% in 2024, signaling expectations of future economic growth and inflation.

The yield on the 2-year Treasury note fell to 4.232% on Tuesday.

The US dollar rose at the end of the year on expectations of economic growth. The US dollar rose sharply after Trump’s re-election in November. The U.S. dollar index, which measures the greenback against a basket of other currencies, is up more than 7.1% for the year, according to data from FactSet.

Bitcoin fell to $93,400 around 16 on Tuesday and fell almost 4% for the month. The world’s largest cryptocurrency has had a memorable year, rising by around 120% in 2024.

That’s a turnaround from just two years ago, when bitcoin was trading below $17,000, following the crypto industry imploded.

Bitcoin – which is highly volatile – rallied this year as it continued to gain mainstream acceptance through Trump’s embrace of cryptocurrencies.

Trump has chosen Paul Atkins, a former commissioner of the Securities and Exchange Commission and a crypto lawyer, to be the SEC chairman. After Trump announced his election, bitcoin crossed $100,000 for the first time.

Gold had one too remarkable yearup 27% and outperforming the S&P 500.

Investors often see gold as a safe haven against economic turmoil and inflation. When the Fed lowers interest rates, gold may become more attractive than income-paying assets like bonds.

However, gold’s rally was also fueled as central banks around the world continued to increase their holdings gold reserves.

Raw materials: Which investment gave the most surprising returns this year? Cocoa.

Cocoa futures on the New York Stock Exchange rose more than 168% over the year.

Cocoa futures prices soared as climate concerns disrupted cocoa harvests in Ghana and Ivory Coast, where over 70% of global cocoa is produced. The squeezed supply sent futures prices skyrocketing.

Futures for coffee and orange juice also increased this year due to erratic climate and poor harvest prospects.

Futures contracts are often traded by institutional investors such as large banks or asset management firms, as opposed to individual investors.