2024 began with concerns about recession, soft landing, hard landing, and other market-related issues. However, now that 2024 is behind us, its economic data reveals strong GDP growth (+2.7% YoY), low unemployment (4.1%), increased consumer spending (+3.7%), and declining inflation (core-PCE +2.8% YoY), which eliminated and resulted in no recession.
As in many years, 2024 had plenty of information to concern the most seasoned investor. The chart below shows the S&P 500 in 2024, annotated with Wall Street Journal front page headlines throughout the year.
In 2024, the major U.S. stock indices recorded notable gains (excluding dividends):
S&P 500: Increased by approximately 23.3%.
Dow Jones Industrial Average: Rose by about 12.9%.
Nasdaq Composite: Advanced by around 28.6%.
Adding in dividends for 2024, a total return of 25.0%, the S&P 500 posted double the return of its historical average, which ranks just above the 75th percentile of its historical average. Even more impressive is the two-year annualized gain of 25.7%, roughly 2.5 times the historical average, ranking above the 87th percentile relative to history. Its short-term returns like this make us less confident in a strong year again for 2025. Could it happen? Sure. Is it likely? Probably not.
For the entire year, the S&P 500 registered 57 record closing highs, or an average of about once per week.
Put differently, the S&P 500 closed at a record high on almost 22% of trading days in 2024. For all years since 1953, the first full year of the 5-day trading week in its current form, there have only been six other years in which there were at least 50 trading days with record highs. The most recent was in 2021 when there were 70 (the second-highest on record).
While the equity markets were good, the bond market was not. The charts below show one, two, five, ten, and twenty-year annualized returns of 10-year treasuries as measured by the BofA/Merrill 10-year Treasury Index. Long-term treasuries typically return about 8% per year, depending on your holding period. That hasn’t been the case anytime in the last two decades.
In 2024, long-term treasuries declined 5.8% on a total return basis, and over the last five years, you’ve lost just about 5% a year holding the 10-year. Even over 10 years, the annualized return of a 10-year is a decline of 0.5% per year. As shown in the chart below, returns over the last one and two years rank below the 14th percentile; for more extended holding periods, the last five, ten, and twenty years have been the worst of any period in the previous 40+ years.
Please be aware that in mid-2023, we substituted long-term bonds in our client accounts with short-term bonds with an approximate maturity of one year, and we have maintained this position throughout 2024.
Here's to a happy and healthy new year!
(1) Charts by Bespoke.com.
Schorn Wealth and Fiduciary Planning, LLC, believes all information in this report to be accurate, but we do not guarantee its accuracy. None of the information in this report or any opinions expressed constitutes a solicitation of the purchase or sale of any securities or commodities. This report is not personalized advice. Investors should do their own research and/or work with an investment professional when making portfolio decisions. As always, the past performance of any investment is not a guarantee of future results. Schorn Wealth's and Fiduciary Planning, LLC's representatives or clients may have positions in securities discussed or mentioned in its published content