Financial Markets and Economy Highlights of December 2024

Major U.S. Equity Indexes: A Mixed December

In December 2024, the U.S. equity markets presented a mixed picture. Notably, megacap tech stocks shone brightly, whereas industrials faced declines. The S&P 500 marked a 2.50% decrease, the Nasdaq 100 achieved an all-time monthly closing high with a gain of 0.39%, and the Dow Jones Industrial Average suffered a historic fall of 5.27%, its longest losing streak since 1978. This mixed performance reflects the market's response to various economic factors and investor sentiment as we head into 2025.

No Santa Claus Rally This Year

Contrary to the usual year-end rallies, often dubbed the 'Santa Claus Rally,' December 2024 did not see a significant surge. Instead, the month was marked by quarter-end and year-end book squaring activities. While some investors hoped for market boosts, the period leading into the new year was relatively subdued, revealing the mixed impact of the holiday season on markets.

Rising Bond Yields and Inflation Concerns

December witnessed a swift rise in bond yields, with the 10-year note yield climbing nearly 39.5 basis points to end around 4.573%. This shift signaled a departure from lower yields, influenced by stubborn consumer-level inflation. Inflation metrics continued to hover above the Fed's target, creating an unpredictable outlook on future economic policies.

Goldilocks Jobs Report

The December jobs report brought positive news with nonfarm payrolls increasing by 227,000, surpassing the Dow Jones estimate of 214,000. October's figures were also revised upward, adding 36,000 jobs. The jobs data was deemed "just right," as it highlighted economic growth without overheating, potentially paving the way for fewer interest rate cuts in 2025 than previously anticipated.

Federal Reserve's Strategy Shift

At the December Federal Open Market Committee meeting, the Fed reduced rates by 0.25%, setting the target range at 4.25%-4.50%. This move was anticipated, yet the Fed hinted at only two potential rate cuts in 2025, down from the four suggested earlier in September. This more hawkish pivot momentarily stirred volatility, which has since stabilized.

In these uncertain times, understanding the intricacies of financial markets is crucial. We encourage you to reach out to our financial team for personalized guidance and support tailored to your investments and needs geared towards navigating 2025's economic landscape.