2024 was the year of US exceptionalism where we saw a repeat of the previous year's story, with U.S. stocks outpacing their global counterparts easily. A broad set of factors influenced markets this year, from geopolitical ups and down, election surprises, monetary policy and many more. But the biggest stories for markets in 2024 were likely the continued outperformance of the MAG7, spurred by the AI trade, as well as the surprising strength of the US economy. The biggest tech stocks continued to do much of the work of powering the S&P 500 higher.
The S&P 500 surged +23%, hitting 57 record highs, this marked the fourth time in the last six years that the index posted a 20%-plus return. The MAG7 accounted for more than 53% of the S&P 500 total return. Nvidia alone made up 21% of the return. Another factor that marked 2024 was the remarkable resilience of the US economy. The case for US outperformance — both economic and financial — has only strengthened as the year has gone on. Economic growth, job creation, consumer spending, and disinflation continued to make progress through 2025, though that progress was sometimes uneven. GDP printed at a 1.6% for Q1, the lowest since Q2’22, but Q2 came in at 3.0% and Q3 at 3.1%. In-fact, it is the only major economy where output is above pre-pandemic trends. Nonfarm employment grew by nearly 2M jobs for the 11 months through November, though the unemployment rate moved up to 4.2% in that report vs the 3.7% in December 2023. Some post-Christmas headlines also suggested a stronger-than-expected holiday shopping season. Core CPI was up 3.3% YoY versus last December’s 3.9%, with disinflation since June 2024. All in, the US economy defied gravity, which in turn also has led to some hesitancy of the FOMC to cut rates as aggressively as thought at the start of 2024. The market now expects less than 40 bps of Fed rate cuts in 2025.
Despite a few hiccups in the final trading days, the broad U.S. stock market finished with its best back-to-back years since 1997 and 1998 with the MSCI World closing out the year at +17%. Meanwhile, European and EM stocks wrapped up the year mostly in the green but significantly underperformed U.S. equities, with the notable exception of the DAX. The rally wasn’t limited to stocks; gold had its strongest year since 2010 and was up +27.5%, and bitcoin more than doubled in value, surpassing $100,000 before slipping back down. On the fixed income front, Treasuries were mostly weaker with the curve steepening; the 2/10 spread flipped positive in early September after having been inverted since July 2022. Despite the long-expected start to Fed rate cutting and 100bp in reductions already made, the 10Y yield rose 66bp for the year with policymakers expected to remain cautious in their moves, this had negative consequences for the Barclays Global Credit as it closed out the year marginally positive at 0.70% although spreads traded close to all time tights. On the FX front, the dollar was stronger amid resilient US growth; DXY +7.0% after a 2.1% softening in 2023 whilst the CHF showed its customary strength during a European economic weakness. WTI crude was up just 0.1% in 2024, while Brent was down 3.1%. While WTI pushed near $90/barrel in the spring, prices over the final quarter of the year remained in a narrow channel as the market debated prospects for both softening China demand and increased output.
Top 10 stats for 2024:
In terms of asset class returns, 2024 marked another year of large divergences:
In summary, 2024 delivered what investors had hoped for: a robust US economy, easing inflation, and looser monetary policy—all complemented by remarkable technological advancements. However, with fluctuating economic data, stretched valuations – at a level of 5,942 (on 3 January), S&P 500 now trades at a P/E 2025e of 22.9x (implied equity risk premium of -0.23%), and the potential for geopolitical uncertainty (particularly regarding trade policies under Donald Trump), 2025 will be inherently more volatile than 2024 albeit with a greater and growing opportunity set driven by the growing deployment of AI tools across the Enterprise (bringing productivity gains and cost cutting potential).