On Monday, the U.S. stock market closed lower in quiet year-end trading, marking the penultimate trading day of 2024. The S&P 500, Nasdaq, and Dow Jones Industrial Average all fell by over 0.5%, with broad market sell-offs, as all of the 11 major sectors of the S&P 500 ended in decline. Nonetheless, 2024 was a remarkable year for U.S. stocks overall, with the Nasdaq climbing nearly 30%, the S&P 500 up over 24%, and the Dow increasing by more than 13% throughout the year.
Year-End Pullbacks and Risk-Aversion
With the week's trading shortened by holidays, risk-aversion sharpened in the market. Year-end tax adjustments, valuation pressures, rising bond yields, and uncertainties regarding 2025 policies and the economy have all emerged as key influencing factors. Oliver Pursche, Senior Vice President at Wealthspire Advisors, stated, "Even with recent sell-offs, the S&P has gained over 50% in the past two years. Investors may choose to secure profits and protect gains." He also noted that in thin trading volumes, market volatility is more easily amplified.
Strong Performance in 2024, Notable Sector Divergence
Despite recent weakness, 2024 remains a standout year for the U.S. stock market. Technology, communication services, and consumer discretionary sectors saw annual gains approaching or exceeding 30%, leading the market, while the materials sector was the only one to decline. Chipmaker Nvidia particularly shone, soaring nearly 180% throughout the year, benefiting from investors' optimism about AI technology prospects. In November, Nvidia replaced Intel in the Dow Jones Industrial Average.
Geopolitically, tensions in the Middle East and other regions intensified, but they failed to hamper the overall robust market performance. Additionally, the Federal Reserve initiated its first rate cut in over four years, offering support to the market.
Political Factors and 2025 Market Expectations
Significant changes in U.S. politics have also drawn market attention. Former President Trump, despite being convicted of 32 felonies at the start of the year, ultimately won the presidential election. His campaign promises include tax cuts and a more favorable regulatory environment, which investors are eyeing with anticipation. Meanwhile, Biden withdrew from the election, with Vice President Harris stepping in as the Democratic candidate.
Pursche predicts that the market in 2025 may experience more volatility, particularly in the first quarter, but he expects stocks to achieve around a 5% return for the year. He mentioned that Trump's policy pledges might further drive the stock market upwards, potentially beyond reasonable valuation limits.
S&P 500's Broad Decline; Boeing Pressured by Korean Air Crash
On Monday, all 11 major sectors of the S&P 500 fell, with the consumer discretionary sector dropping the most, down 1.6%. Boeing's stock dropped 1.6% after South Korea's acting President Choi Sang-mu ordered an urgent safety inspection of all airlines in the country. A recent crash involving a Boeing 737-800, one of the deadliest in Korea's aviation history, has heightened market concerns over Boeing's safety issues.
Despite year-end pullbacks, analysts generally maintain a cautiously optimistic outlook for 2025, focusing on how policy changes and economic fundamentals will further impact the stock market.
