The fourth quarter of 2024 presented mixed outcomes for global equity markets. In the United States, the S&P 500 Index ended the year on a strong note, delivering another positive quarter and bringing its total annual return to just over 25%. Conversely, international developed and emerging markets faced steep declines as concerns over tariff-related rhetoric triggered sharp declines in foreign currency values relative to the U.S. dollar. However, ex-US markets maintained a positive return over the calendar year.
The U.S. economy remained resilient through year-end. Inflation rose slightly in November, reaching 2.7% year over year. Core inflation, which excludes volatile items like food and energy, increased by 3.3%, matching October’s figure. Although inflation levels have moderated compared to recent years, the stagnation toward the Federal Reserve’s 2% inflation target could prompt the Federal Open Market Committee (FOMC) to delay further interest rate reductions.
The most consequential event of the fourth quarter unfolded in the political arena. On November 5th, Donald Trump won the presidential election, becoming the 47th president of the United States. Republicans also maintained control of the House of Representatives and regained the Senate, securing a majority across Congress.
Beyond U.S. borders, political upheaval defined the quarter in Europe. In December, France’s government collapsed following a vote of no confidence, largely driven by backlash against proposed austerity measures aimed at reducing the budget deficit. This marked the first governmental collapse in France since 1962. Shortly thereafter, Germany’s government also fell after a no-confidence vote stemming from disagreements within Chancellor Olaf Scholz’s coalition regarding national debt policy. Both nations are now preparing for snap elections, with Germany’s scheduled for February 2025.
In the U.S. real estate market, the average 30-year fixed mortgage rate reversed its favorable third-quarter decline and climbed during the fourth quarter. After reaching a low of just over 6% at the end of Q3, rates increased to approximately 6.9% by year-end. These higher interest rates continued to exacerbate affordability challenges for prospective homebuyers, as evidenced by longer home listing durations in recent months.
WTI oil prices declined over the quarter, falling from nearly $78 per barrel to roughly $74 per barrel. Average monthly gasoline prices followed suit, declining by about 20 cents per gallon over the quarter.
Throughout 2024, yield curves for both Treasuries and corporate bonds continued to revert back to a normal, upward slope. This means that yields on intermediate and long-term bonds are higher than short-term bonds. The more unusual, inverted yield curve was caused by the Fed’s rate-hiking campaign throughout 2022 and 2023.
FOURTH QUARTER EQUITY INDEX RETURNS
Overall, US equity markets had a positive return for the fourth quarter, as technology and AI stocks pushed the S&P 500 to add just under 2.5%
to its annual return. Outside the US, international developed markets and emerging markets faced sharp declines due to foreign currency weakness as rhetoric around proposed tariffs amplified.
FOURTH QUARTER ALTERNATIVE INDEX RETURNS
Global REITs, which had a strong start to the year, declined sharply during the quarter, with ex-US REITs dropping more than 15%. Meanwhile, high-yield bonds remained flat for the quarter but delivered an impressive return of over 8% for the year.
FOURTH QUARTER FIXED INCOME INDEX RETURNS
During the quarter, short-term interest rates saw a slight decline, while intermediate and long-term interest rates rose. Consequently, short-term bonds performed better than intermediate and long-term bonds.
As we close the books on another eventful year, we hope you are looking forward to 2025 and all that the beginning of a new year brings. We look forward to working with you in the upcoming year and continuing to help achieve your financial goals. In the meantime, we wish you and your loved ones good health, happiness, and success in the year to come!