2024 Year in Review

Financial markets demonstrated impressive resilience in 2024, continuing the bull market that began in late 2022. This performance came despite headwinds such as global geopolitical tensions, interest rate fluctuations, uncertainty surrounding the U.S. elections, and the rollercoaster performance of the "Magnificent 7" technology stocks.

Global Market Performance

The U.S. stock market posted a gain of more than 20% for the second consecutive year, a feat last achieved in 1998–1999. While periodic downturns tested investor confidence, these were followed by swift recoveries, underscoring market adaptability. Globally, developed markets led the charge, producing broad-based positive returns:

  • +25.0% - U.S stockmarket (S&P 500)

  • +29.6% - NASDAQ

  • +11.4% - Australian stockmarket (ASX 300)

  • +17.8% - Global stockmarket (ex-Australia)

  • +17.6% - Australian listed property trusts

  • +8.0% - Emerging markets

  • +4.5% - Fixed interest (short-term)

  • +2.3% - Fixed interest (global longer-term)

The Role of Interest Rates and Inflation

The U.S. Federal Reserve cut interest rates by 1.0% during 2024, bringing the target range to 4.25%–4.5%. These cuts—the first since the pandemic—reflected easing inflationary pressures and mixed labour market signals. Inflation in the U.S. approached multiyear lows, providing breathing room for policymakers and optimism for markets.

Meanwhile, the Reserve Bank of Australia (RBA) maintained the cash rate at 4.35% throughout the year, highlighting confidence in the nation’s inflation trajectory and economic resilience.

Source: JP Morgan

While investors may worry about the impact of interest rate changes, it’s helpful to remember that the market and the Fed/RBA don’t necessarily travel in lockstep. Since 1983, the average US stock market return was similar in months with target rate increases, decreases, and no change.1 It’s a reminder that the market is constantly incorporating new information into prices—including expectations for moves by the Reserve Banks.

Lessons for Investors

The US elections concluded with Republicans winning the presidency as well as control of the Senate and House of Representatives. Election outcomes aside, history shows stocks have trended higher regardless of which party is in power in Washington - https://loricapartners.com.au/insights/do-financial-markets-care-who-the-president-is. The message is that, whether you are optimistic or pessimistic about the future, there’s reason for optimism about the market.

2024 reaffirmed an essential truth: markets thrive on resilience and adaptability. As we step into 2025, the biggest risks often remain those we cannot anticipate. That’s why strategic planning, rather than reactive predictions, is the cornerstone of sound investing.

Investors are best served planning for what could happen rather than trying to predict what will—by having a diversified portfolio that aligns with one’s risk tolerance and sticking with it. After all, the market reflects the efforts of companies to solve problems and provide goods and services. In the long run, innovation wins the race even amid a changing world.

 

 

1 From January 1983 to December 2024, the average monthly return for US stocks, as measured by the Fama/French Total US Market Research Index, was 0.89% when there was a target rate increase, 1.21% when there was a target rate decrease, and 1.02% when there was no target rate change.

Rick Walker