2024 was quite the year for the market! Major events and new technology presented a great outcome for investors this past year. Here are some key events from 2024:
- The S&P 500 gained more than 23% in 2024 (total return 25%), a year with 57 record highs (5th most since 1957), and not a single 10% correction.
- The Magnificent Seven drove about half of the gains and powered large cap and growth leadership on artificial intelligence investment and optimism.
- The Russell 1000 Growth Index returned 33.4% for the year, about 19 percentage points ahead of its Value counterpart, which gained 14.4%.
- Communication services (+40.2%), technology (+36.6%), financials (+30.5%), and consumer discretionary (+30.1%) topped the sector leaderboard, consistent with the strong year for growth stocks.
- Strength in mega-caps left small caps behind, as the Russell 2000 Index returned 14.4%. Relative earnings weakness and interest rate sensitivity weighed on smalls.
- The U.S. strongly outpaced developed international and emerging market (EM) equities as the MSCI EAFE and MSCI EM indexes returned 4.4% and 8%, respectively. Inferior economic and earnings growth and a strong U.S. dollar (up over 7% for the year) weighed on non-U.S. markets. Laggards included France (-4.6%) and South Korea (-23.2%), while Taiwan (+35.1%) and China (+19.9%) were among the best performers outside the U.S.
- Heading into 2025, LPL Research continues to favor growth over value and U.S. over international and EM, while recommending benchmark-like exposure across the market cap spectrum. Favored sectors include communication services and industrials.
As we look ahead to 2025, it's important to remember that it is much more likely to have positive years for stocks.
- In the recently published Outlook 2025: Pragmatic Optimism, LPL Research called for mid-to-high single-digit returns for stocks this year and cited a fair value target range of 6,275 to 6,375 for the S&P 500.
- As the accompanying graphic illustrates, this range (up 5–15%) has been the most common for S&P 500 annual price returns, though it’s only occurred 18 out of the past 76 years dating back to 1950.
- Stocks are also much more likely to be up than down, with gains in 74% of all years.
- While accurately predicting stock market performance a year out requires some luck, consider how much fatter the right tail is than the left. Stocks are about six times more likely to experience a big up year than a big down year, using 15% up or down as the threshold.
- The average gain for the S&P 500 since 1950 is +9.3% (excluding dividends), making a positive year a very reasonable place to start when making a forecast.
- LPL Research believes solid prospects for economic growth, lower inflation, and rising corporate profits make gains in 2025 perhaps more likely than these statistical odds. Risks include rising interest rates, geopolitical threats, stretched positioning, and overly bullish sentiment.
Source: LPL Research, Bloomberg 12/24/24 Past performance is no guarantee of future results. All indexes are unmanaged and can’t be invested in directly. The modern design of the S&P 500 stock index was first launched in 1957. Performance back to 1950 incorporates the performance of the predecessor index, the S&P 90.
Ultimately, we can never predict exactly how the markets will shape out in 2025, but we are optimistic for another good year in a bull market. If you are looking to get in touch with a financial professional, please fill out our Discovery Questionnaire to schedule a 15-minute discovery call with our team. We would love to discuss your values and goals in order to determine if we would be a good fit to serve you. We hope you and your family have a great 2025!
Source: LPL Research
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This material is for general information only and is not intended to provide specific advice or recommendations for any individual. It does not take into account the specific investment objectives, tax and financial condition, or particular needs of any specific person. There is no assurance that the views or strategies discussed are suitable for all investors or will yield positive outcomes.
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