We finally have the US election in the rear view mirror. US stocks rallied in response to the election results, but then sold off heading into year end. By comparison, international stocks simply withered in the 4th quarter. For the second year in a row, large US stocks out performed both small US stocks and international stocks.
US Bonds were flat for the year and have struggled to develop any sort of positive momentum in the face of rate cuts by the Federal Reserve. This offers a good illustration of the limits on the Fed’s power to control longer term interest rates.
Overall, 2024 was a fairly quiet year for investors. The markets didn’t throw us too many headaches and the stomach churning drops were nowhere to be seen. Any diversified investor should come away from 2024 relatively happy.
Economic update
The economy continues to hum along at a decent pace. However – as I’ve written about previously – the economy continues to struggle with a major PR problem. Namely, there is a big disconnect between how the US economy is doing according to the data (generally good) vs how it’s doing according to the perceptions of everyday people (generally bad). While GDP, labor markets, and corporate profits/valuations are clearly indicating a healthy economy, too many everyday people in the US are not seeing the benefits in their own lives. Inflation seems to be the main driver of this disconnect. Higher prices in food, insurance, housing, etc. have soured the popular perception of the US economy.
The Federal Reserve continues to chip away at interest rates with the current target around 4.25%. This reflects the Fed’s general assessment that inflation has been vanquished. However, the Fed disappointed financial markets in December by indicating only two potential rate cuts in 2025. The market was forecasting closer to 4-5. Perhaps the Fed is not 100% convinced they have beaten inflation just yet. The new presidential administration could also inject some additional uncertainty to the Fed’s rate strategy over the next few months.
US federal spending and debt have taken center stage with the creation of the Department of Governmental Efficiency (DOGE). Elon Musk and his colleagues plan to trim $2 trillion from annual government spending. They were able to exert significant influence over the recent congressional negotiations around funding the government. However, it remains to be seen whether DOGE can force Congress to take any meaningful action around federal debt levels, which almost certainly will require significant adjustments to the largest spending items – Social Security (20%), Medicare (16%) and national defense (14%).
One last thing to keep an eye on is bird flu. The CDC indicates that there is currently no human-to-human spread and the current public health risk is low. However, there has been an uptick in human infections for people associated with infected cow herds and chicken flocks. Most of the infected animals are in California. Infectious disease experts are carefully watching for any major infections in pig herds as this would indicate a higher probability of human susceptibility to a future mutation of the virus.
Matthew Jenkins is the Founder of Noble Hill Planning LLC. Matthew has over 15 years of experience working in both large and small financial services firms. Before starting his career in finance, Matthew served as a U.S. Army Ranger. Matthew values transparency and fair dealing and enjoys helping people prepare for a great retirement.
Market Commentary 2024
Market update
We finally have the US election in the rear view mirror. US stocks rallied in response to the election results, but then sold off heading into year end. By comparison, international stocks simply withered in the 4th quarter. For the second year in a row, large US stocks out performed both small US stocks and international stocks.
US Bonds were flat for the year and have struggled to develop any sort of positive momentum in the face of rate cuts by the Federal Reserve. This offers a good illustration of the limits on the Fed’s power to control longer term interest rates.
Overall, 2024 was a fairly quiet year for investors. The markets didn’t throw us too many headaches and the stomach churning drops were nowhere to be seen. Any diversified investor should come away from 2024 relatively happy.
Economic update
The economy continues to hum along at a decent pace. However – as I’ve written about previously – the economy continues to struggle with a major PR problem. Namely, there is a big disconnect between how the US economy is doing according to the data (generally good) vs how it’s doing according to the perceptions of everyday people (generally bad). While GDP, labor markets, and corporate profits/valuations are clearly indicating a healthy economy, too many everyday people in the US are not seeing the benefits in their own lives. Inflation seems to be the main driver of this disconnect. Higher prices in food, insurance, housing, etc. have soured the popular perception of the US economy.
The Federal Reserve continues to chip away at interest rates with the current target around 4.25%. This reflects the Fed’s general assessment that inflation has been vanquished. However, the Fed disappointed financial markets in December by indicating only two potential rate cuts in 2025. The market was forecasting closer to 4-5. Perhaps the Fed is not 100% convinced they have beaten inflation just yet. The new presidential administration could also inject some additional uncertainty to the Fed’s rate strategy over the next few months.
US federal spending and debt have taken center stage with the creation of the Department of Governmental Efficiency (DOGE). Elon Musk and his colleagues plan to trim $2 trillion from annual government spending. They were able to exert significant influence over the recent congressional negotiations around funding the government. However, it remains to be seen whether DOGE can force Congress to take any meaningful action around federal debt levels, which almost certainly will require significant adjustments to the largest spending items – Social Security (20%), Medicare (16%) and national defense (14%).
One last thing to keep an eye on is bird flu. The CDC indicates that there is currently no human-to-human spread and the current public health risk is low. However, there has been an uptick in human infections for people associated with infected cow herds and chicken flocks. Most of the infected animals are in California. Infectious disease experts are carefully watching for any major infections in pig herds as this would indicate a higher probability of human susceptibility to a future mutation of the virus.
Matthew P. Jenkins, CFA, CFP®
Matthew Jenkins is the Founder of Noble Hill Planning LLC. Matthew has over 15 years of experience working in both large and small financial services firms. Before starting his career in finance, Matthew served as a U.S. Army Ranger. Matthew values transparency and fair dealing and enjoys helping people prepare for a great retirement.
Matthew is a CFA® Charterholder and CERTIFIED FINANCIAL PLANNER™ Professional. He is also a member of the National Association of Personal Financial Advisors (NAPFA) and the Fee Only Network.