2024: A Year of Change for The Markets and Economy

The economic soft landing is one of two major developments this year that pleasantly surprised investors and helped the S&P 500 climb roughly 25% through the start of December. The other was the resounding election victories of President-elect Donald Trump and the Republican party. 

Trump won the popular vote by a wide enough margin that recounts and delays in declaring the winner were unnecessary. Likewise, the Republican party captured control of both houses of Congress, which should help the future president push through his agenda.  

Here's a look at how the two major events of 2024 have affected the market in ways both expected and not.  

Rate cutting cycle begins. The US economy has proved amazingly resilient this year, defying expectations that high interest rates would choke off economic growth and send the economy into recession. Economic data has consistently come in stronger than expected, reflecting continued consumer spending and solid corporate earnings growth. Third quarter GDP grew 2.8%, the unemployment rate at 4.1%, remains near historic lows, and corporate earnings are forecast to grow about 9% this year.    

So far, the Fed has lowered interest rates twice by a total of 0.75 percentage point and it may not need to do much more. Thanks to the improved economic outlook and Trump policies that may boost economic growth and inflation, investors are only forecasting two to three additional interest rate cuts over the next year, which would bring the federal funds rate down to around 3.75% to 4.00%.  

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Trump shakes things up. President-elect Trump has hit the ground running, announcing who will fill the many leadership rolls in the next administration. He continues to talk about placing tariffs on imported goods even though tariffs could spark at trade war or inflation. He has also promised to cut taxes on corporate earnings, Social Security payments, tips among other things. And he has promised to deport illegal immigrants, which could spark wage inflation.  

Optimists are hopeful that many of Trump’s campaign promises are just opening salvos in negotiations with foreign countries and Congress. But the bond market may be worried about ever larger deficits and sticky inflation. Even though inflation has decelerated this year and the Federal Reserve has cut short-term interest rates, the yield on the 10-year Treasury bond yield has risen slightly from the start of the year to 4.3%. 

Because long-term rates have stayed high, borrowing to buy a home or a car has remained expensive. The bounce in home sales that was expected in January never materialized. Likewise, the amount of interest the federal government pays on its debt has surged. On the flip side, high interest rates mean consumers can generate decent income by investing in bonds for the first time in many years.    

Optimism abounds. With the economy growing, the Federal Reserve cutting interest rates, and President-elect Trump expected to enact business-friendly policies, investors have reason to be optimistic. Wall Street analysts are calling for S&P 500 earnings to rise 15% in 2025.   

After the market’s strong run this year, the S&P 500’s forward P/E is 22.0, up from ____ at the start of 2024 and well above the 30-year average of 16.8. The index’s forward P/E has only been higher during two other periods over the last 25 years: In 2021 ck and in 1999 and 2000. In both bull and bear markets, we rebalance portfolios to ensure they continue to reflect investors’ risk tolerance levels. OK???? 

We’re happy to discuss how the market changes of the past year have affected your personal finances or your business, and share how we can help you to create a financial strategy aligned with your specific goals. Contact us for a complimentary consultation on our website at whzwealth.com, or give us a call at (860) 928-2341.     

Authored by Principal/Managing Partner Laurence Hale AAMS, CRPS®. Securities and advisory services offered through Commonwealth Financial Network®, Member FINRA/SIPC, a Registered Investment Adviser. These materials are general in nature and do not address your specific situation. For your specific investment needs, please discuss your individual circumstances with your representative. WHZ Strategic Wealth Advisors does not provide tax or legal advice, and nothing in the accompanying pages should be construed as specific tax or legal advice. 697 Pomfret Street, Pomfret Center, CT 06259 and 392-A Merrow Road, Tolland, CT 06084. 860-928-2341. www.whzwealth.com.