2024 Q4 Quarter-End Market Update: Wrapping up a Tumultuous Year

Where to Begin?

We have been writing these letters for decades and have had some interesting times to write about, but 2024 is challenging to describe and summarize.  I sit here staring at the screen, wondering where to begin.

Wars in Europe and all over the Middle East?

AI?
Quantum computing?
The Magnificent Seven and momentum in the equity market?

Inflation and Fed Policy?

The assassination of a CEO on the street?

All of the events related to the election?
Elon Musk and so many Tech CEOs are changing course?
And DOGE? 

How About Our Investments?

Since we are investment advisors, a simple summary of capital markets outcomes would be in order.  The Magnificent Seven stocks had another banner year, driving the overall S&P 500 to a second big year in a row.  As of Friday, December 13, the S&P 500 was up over 28% year to date, although the sharp downturn Wednesday the 18th following the Fed meeting took more than 3% off that number.¹Source: Morningstar Direct. Data as of 12/18/24.

Unlike 2023, however, we also saw double-digit gains from value and US Small Cap stocks.  Domestic equities have had a banner year overall, as the US economy performs well, and the market rally broadens.

International and Emerging Markets equities did reasonably well, but did not keep pace with US equities.  The US economy and markets are dominating, along with the US dollar.

Meanwhile, bonds have produced modest positive returns with a lot of volatility, as rates have fluctuated quite a bit.  This latest Fed event provides a good example. 

OK, So What Did the Fed Just Do Anyway?

The Wall Street Journal headline says, “The Fed admits an inflation mistake.” That’s it right there. As many have been saying, inflation appears to be sticky, and the Fed has now admitted that. Expectations for further rate cuts were reduced accordingly, and the markets reacted badly. The yield on the 10-Year Treasury jumped to 4.52%.²The Editorial Board. “The Fed Admits an Inflation Mistake.” The Wall Street Journal, 18 Dec. 2024, www.wsj.com/opinion/federal-reserve-fomc-interest-rate-cut-jerome-powell-markets-inflation-aa9d6987.

That being said, this one bad day did not undo the good year for equities, and 4.5% is not that high for the 10-Year Treasury. This is not a reason for panic. However, this kind of volatility may reflect how highly valued equities are after the large gains of the last two years; maybe a reminder to stay diversified and not chase the momentum of some of these high-flying stocks! 

So, What About All Those Other Issues?

The political issues are not really our responsibility, and are rapidly evolving as we speak.  We will have to wait and see how those things play out and what, if any, impacts there are on capital markets and the economy.

The wars are tragic, devastating, and threatening.  And complicated.  Perhaps some part of that will be the subject of a future letter, hopefully with some good news.These global events will undoubtedly continue to unfold in the coming year. 

Let’s Pause Here and Extend Our Warmest Wishes for Health and Happiness to Each of You for the Holidays and the New Year.

You are the reason we are here, and we appreciate your support and the opportunity to serve you every day, especially now as we enter the Holidays and end this tumultuous year. Best wishes from all of us to all of you! 

Team Hewins, LLC(“Team Hewins”) is an SEC-registered investment adviser; however, such registration does not imply a certain level of skill or training, and no inference to the contrary should be made. We provide this information with the understanding that we are not engaged in rendering legal, accounting, or tax services. We recommend that all investors seek out the services of competent professionals in any of the aforementioned areas. Certain information provided herein is based on third-party sources, which information, although believed to be accurate, has not been independently verified by Team Hewins. Team Hewins assumes no liability for errors and omissions in the information contained herein. Certain information contained herein constitutes forward-looking statements. Team Hewins does not guarantee the achievement of long-term goals in the portfolio review process. Past performance is no guarantee of future results, and a diversified portfolio does not guarantee a positive outcome. Nothing contained herein may be relied upon as a guarantee, promise, assurance, or a representation as to the future.