Coming into 2024 most major banks and other prognosticators predicted the markets would decrease or remain around the same level after posting returns of 26% for the S&P and 54% for the Nasdaq in 2023. Yet here we are nearing 30% gains twelve months later. Increases of nearly 60% over a two-year period are rarely seen for the S&P 500 so we expect to hear similar muted predictions this year. And hopefully we do, because tops are made when bears get bullish. We’ll leave the forecasting to others and focus on items we can measure, like sentiment and price. But first let’s review a few things we experienced in 2024.
It was a wild year with interest rates, the election, cryptocurrencies, and FOMO. Bonds remained in a brutal bear market as interest rates refused to meaningfully fall. They’ve even been creeping up as the Fed’s been lowering. The inflation rate came well off its highs of 9% two years ago, but goods are still more expensive. In the last 5 years food prices have jumped nearly 30%, and going out to eat is becoming increasingly less appealing after seeing the bill. The election cycle was somehow even more wacky than predicted with Biden being forced out and major parts of Silicon Valley jumping behind Trump. Venture capital and tech tycoons now seemingly have more say than Goldman Sachs and Wall Street in the Republican party for the first time in memory. What that will actually mean for policy or the economy is anyone’s guess. Part of their support may have come due to their cryptocurrency interests. The Biden administration and the SEC have been slow to give guidance and support for Bitcoin and related assets causing some interested companies to look across the aisle. Consequently, since the election cryptocurrencies have rallied strongly. So much so that so-called “meme coins” have skyrocketed in value. People’s fear of missing out (FOMO) has driven things like Fartcoin (this is real) to over a billion-dollar valuation, making it worth more than 40% of all US companies. Crypto added $2 trillion in market-cap recently, but with all this zaniness going on it feels like $100 trillion in attention.
Twenty twenty-four was full of noise like this that served to scare some and excite others. It’s impossible to judge people’s motives for buying at one level and selling at another but we don’t have to, we just have to know what those levels are. Take one example, if the Dow stays above about 42,000 then the current uptrend is most likely intact as the math is showing plenty of buyers there. If it slips below that level things could get a little messy, but it still wouldn’t necessarily mean the party is over. Many more indicators would have to show downtrends. Despite the negativity displayed in the financial media over the past year, it is still impossible to have a bear market without stocks actually going down. The S&P 500, Dow Jones, and Nasdaq all closed at their highest levels in history last month and were up around 24% for the full year. The trend here for stocks is definitely not down despite the recent volatility. We’re also right in the middle of the most bullish 3-month period of the calendar and sector rotation is continuing to drive prices higher.
It takes two sides to make a market, and in 2024 even more than other years, the sell-side permabears voiced their pessimism promising recessions and crises daily. For this we are very thankful because they have kept a lid on the greedy animal instincts that cause markets to soar and pop and allowed us market participants to profit in an orderly fashion while the skittish remain on the sideline waiting for the next shoe to drop. Hopefully the muted 2025 expectations remain muted so this bull can keep marching on through the new year.