The fourth quarter started slow as all major asset classes posted negative performance through October. That changed in early November with the election which saw a Republican sweep of the President, Senate, and House.
From that point on, US Equities outperformed due to expectations of a business-friendly administration. International equities declined in value almost entirely because of a strengthening dollar. Bonds also sold off as interest rates rose on renewed inflationary concerns partly due to loose fiscal policy.
The Federal Reserve cut interest rates twice, lowering the target rate to 4.4%. However, in the December meeting they decreased the forecast for cuts in 2025 to two, far fewer than the six cuts the market was expecting three months ago. The Fed’s guidance combined with markets reassessing valuations led to a selloff in the final two weeks of the year.
Price Action
US Equities jumped 7% in the month following the election. While that may have led one to believe it was another good quarter for investors, it wasn’t. A balanced 60/40 portfolio declined 1.7% as bonds and international stocks sold off. Despite the 7% pop, US equities only netted 2.7% for the quarter due to poor performance in October and the back half of December.
Longer-term interest rates rose substantially (0.7%) leading to losses for holders of long-term bond and related products like mortgages. At the end of September, the national average of a 30-year mortgage was 6.1%. Today it’s up to 6.9%.
One of the biggest stories of the quarter was Bitcoin gaining 55%, briefly surpassing $100,000. Despite holding no intrinsic value and solving a problem many don’t think exists, demand for the cryptocurrency remains strong. What its future holds is anyone’s guess.
US Stocks were the best performers for the quarter and the year (2.7% and 23.8% respectively).
International Stocks posted a dismal quarter erasing most of their gains for the year (-8.5% and 3.3% respectively).
Long-Dated Treasuries got clobbered finishing down 13% for both the quarter and the year.
Short-term corporate bonds hung in well, finish the quarter close to flat and up 5% for the year.
Gold had a quiet quarter, finishing close to flat, but still gained 27% for the year. Bitcoin more than doubled in 2024, appreciating 123%!
Housing prices gave back some of their recent gains, falling 0.5% for the last 3 months we have data.
Looking Forward
With the Federal Reserve expecting to take more muted action next year, more attention will be paid to corporate earnings and whether or not companies can deliver on the historically high earnings growth rates the market is pricing in.
Macro investors are paying close attention to the dollar. It’s trading near a 40-year high and could be a driver of better international stock performance in the future. If you’re thinking about a trip to Europe, now might be a good time – as of this writing the Dollar and the Euro are within a few percent of parity. A far cry from my first European trip in 2008 when a dollar got me 0.63 Euros.
While Large-Cap US Stocks are trading at high valuations relative to history (30% higher than historical averages), most everything else is withing 10% of long-term figures. There’s a good chance the next decade will prove to be a case study in why staying diversified is the prudent move for investors.
Rialto Wealth Management is a fee-only, fiduciary, advisory firm based in Syracuse, NY. From financial planning to investment management, we help families across New York and beyond. We can be reached by phone at (315) 992-9129 or via email through our website’s secure and confidential contact page.
Q4 2024 Market Commentary
January 27, 2025 by Ethan Gilbert
The fourth quarter started slow as all major asset classes posted negative performance through October. That changed in early November with the election which saw a Republican sweep of the President, Senate, and House.
From that point on, US Equities outperformed due to expectations of a business-friendly administration. International equities declined in value almost entirely because of a strengthening dollar. Bonds also sold off as interest rates rose on renewed inflationary concerns partly due to loose fiscal policy.
The Federal Reserve cut interest rates twice, lowering the target rate to 4.4%. However, in the December meeting they decreased the forecast for cuts in 2025 to two, far fewer than the six cuts the market was expecting three months ago. The Fed’s guidance combined with markets reassessing valuations led to a selloff in the final two weeks of the year.
Price Action
US Equities jumped 7% in the month following the election. While that may have led one to believe it was another good quarter for investors, it wasn’t. A balanced 60/40 portfolio declined 1.7% as bonds and international stocks sold off. Despite the 7% pop, US equities only netted 2.7% for the quarter due to poor performance in October and the back half of December.
Longer-term interest rates rose substantially (0.7%) leading to losses for holders of long-term bond and related products like mortgages. At the end of September, the national average of a 30-year mortgage was 6.1%. Today it’s up to 6.9%.
One of the biggest stories of the quarter was Bitcoin gaining 55%, briefly surpassing $100,000. Despite holding no intrinsic value and solving a problem many don’t think exists, demand for the cryptocurrency remains strong. What its future holds is anyone’s guess.
Looking Forward
With the Federal Reserve expecting to take more muted action next year, more attention will be paid to corporate earnings and whether or not companies can deliver on the historically high earnings growth rates the market is pricing in.
Macro investors are paying close attention to the dollar. It’s trading near a 40-year high and could be a driver of better international stock performance in the future. If you’re thinking about a trip to Europe, now might be a good time – as of this writing the Dollar and the Euro are within a few percent of parity. A far cry from my first European trip in 2008 when a dollar got me 0.63 Euros.
While Large-Cap US Stocks are trading at high valuations relative to history (30% higher than historical averages), most everything else is withing 10% of long-term figures. There’s a good chance the next decade will prove to be a case study in why staying diversified is the prudent move for investors.
Rialto Wealth Management is a fee-only, fiduciary, advisory firm based in Syracuse, NY. From financial planning to investment management, we help families across New York and beyond. We can be reached by phone at (315) 992-9129 or via email through our website’s secure and confidential contact page.