Sandy Cove Advisor’s Market Review & Outlook
With a new year comes a new format for our quarterly market discussions. We value your time and want to make the market information we present more concise and easier to read. To that end, we are doing away with the multi-page version of two reports (last year’s review and this year’s outlook). We’re combining those pieces and making them easier to follow with more bullet points summaries and illustrative graphics. We hope you enjoy the format.
Major indexes in 2024 were mostly positive, with the U.S. equities handily beating the rest of world index returns. It continued to be a risk-on market in 2024 similar to 2023 where cryptocurrency and high-growth technology stocks were the big winners.
Internationally, returns were meager in dollar terms with non-U.S. developed countries (think mostly Europe) gaining only 3.8% when translated into dollars. In local currency the gains were better recording a 12.0% growth in 2024, but still well below the U.S. counterpart of the S&P 500.
Bonds returned to their modest positive gains, mostly from the income component (coupon payments).
Treasury yields rose across the board in 2024 and the 26-month inversion of the curve ended (inversion means that shorter term bonds had hgher yields than longer-dated bonds). The Fed lowered rates by 100 basis points (1.00%) from September to December.
The municipal bond market saw rates rise and the yield curve return to its normal, upward sloping position (downward, or inverted curve tends to signal impending recession, which did not happen). Municipal funds recorded a positive $42 billion inflow in 2024, much improved from the previous two years.
Equity returns by sector saw the most strength in technology (communication services and information technology), but other areas of the economy also posted solid returns like the 30.6% in financials and the 23.4% return in utilities. Only two economic sectors had single digit returns (energy and healthcare) while basic material stocks in the S&P were flat for the year.
We are once again constructive on equities and believe that the AI infrastructure build-out along with other machine learning advancements will continue to provide strong earnings growth. There is a good economic backdrop as we enter the year. We have a new administration taking office that is more constructive to U.S. corporate innovation and growth. Of course there are risks, as there always are when investing in stocks, but we weigh those risks against the rewards of investment gains and believe that 2025 is another year where risk assets will outperform.
We share the following graphics on the S&P 500 historical returns to put our viewpoint in some perspective. No, history does not always repeat itself, but it’s worth understanding the patterns of the past.
S&P 500: Multiple Up Years; Few Back-to-Back Down Years
The color-coded S&P 500 return view above is interesting on several levels:
- Since the depression, there were 6 times periods where the S&P had double-digits returns for 3 (or more) consecutive years.
- The graphic also shows that it is not normal for the S&P to return an average 6-10% annual growth. Rather, the index tends to have big up years and a few down years.
- Of the 96 years on the table above, only five years had 6-10% growth.
- In the last 2 decades, five years had single digit performance (positive & negative) while the other 75% of the time returns were +/-10% or more.
In conclusion, we are excited to embark on another year of investing for our clients. We hope the outlines, summaries, and graphics in this piece give you a good idea of where the markets have been and hopefully where they are headed. We would love to hear your feedback on the new format. We look forward to speaking with you in this new year that we hope it is both healthy and prosperous.
As always, please reach out to us if you have any questions.