• Key Takeaways
• Market Performance Overview
• Factors Driving Market Gains
• Looking Ahead to 2025
• Conclusion
• Sources

US stocks closed lower on the final trading day of 2024, marking a disappointing end to a year that saw significant gains for major indices. The S&P 500 recorded its best two-year performance since the late 1990s, with a remarkable 53% increase over the past two years. Despite the downturn, analysts remain optimistic about the market's future, citing strong economic fundamentals and anticipated earnings growth.

Key Takeaways

• The S&P 500 closed down 0.4% on December 31, 2024, while the Dow Jones Industrial Average fell 0.07% and the Nasdaq Composite dropped 0.9%.
• The S&P 500 achieved a 23% gain in 2024, following a 24% increase in 2023, marking the best consecutive annual performance since 1997-1998.
• The tech sector, particularly the "Magnificent Seven" stocks, played a crucial role in driving market gains, contributing over 50% of the S&P 500's total returns.
• Analysts predict a more volatile market in 2025, with expectations of continued economic growth but potential challenges from inflation and Federal Reserve policies.

Market Performance Overview

On the last trading day of the year, the S&P 500 closed at 5,881, down 0.4%. The Dow Jones Industrial Average ended at 42,544.22, down 29.51 points, while the Nasdaq Composite finished at 19,310, down 0.9%. This decline marked the first time since 1966 that the S&P 500 ended the year with four consecutive down days.

Despite the weak finish, 2024 was a strong year overall. The S&P 500's two-year gain of 53% is the best performance since the late 1990s, driven by a combination of factors including a cooling inflation rate, strong consumer spending, and a robust job market.

Factors Driving Market Gains

Several key factors contributed to the impressive market performance in 2024:

1. Artificial Intelligence Boom: The surge in AI-related stocks, particularly the "Magnificent Seven" (Apple, Microsoft, Amazon, Alphabet, Meta, Nvidia, and Tesla), significantly boosted the S&P 500's performance.
2. Political Developments: The reelection of President-elect Donald Trump in November created optimism among investors, contributing to market gains in the final months of the year.
3. Federal Reserve Actions: The Fed's decision to cut interest rates for the first time in four years helped support stock prices, with expectations of further cuts in 2025.

Looking Ahead to 2025

As we move into 2025, analysts are cautiously optimistic. While the market is expected to continue growing, the pace may slow down. Key predictions include:

• Earnings Growth: Analysts expect S&P 500 earnings to grow by approximately 15% year-over-year in 2025.
• Volatility: Increased volatility is anticipated due to uncertainties surrounding Federal Reserve policies and potential inflationary pressures.
• Market Targets: Strategists have set a median year-end target for the S&P 500 at 6,600, representing a potential 12% increase from current levels.

Conclusion

The end of 2024 saw US stocks close on a down note, but the overall performance throughout the year was historic. With strong economic fundamentals and a favorable political landscape, investors remain hopeful for continued growth in 2025, despite the potential for increased volatility and challenges ahead.

Sources

• Stock market today: Dow drops 305 points as US stocks stumble into the new year, Yahoo Finance.
• Stocks close down in final session of 2024; S&P 500 posts best two-year gain in decades - UPI.com, upi.
• Stock market today: Stocks slide as Wall Street's year of 20% gains ends on a quiet note, Yahoo Finance.
• Stocks just did something they haven’t done in nearly three decades, Yahoo Finance.
• Here's where Wall Street sees stocks heading after the best 2-year stretch since '97-'98, Yahoo Finance.