Fourth Quarter 2024 Review and Outlook

What just happened? Investors in U.S. stocks had much to celebrate in 2024: the S&P 500® index of large capitalization shares advanced more than 20%, well above the index’s 50-year average return of 10.6% and the second year in a row of strong equity returns. A year ago, few forecasters predicted such a strong stock market. Back then, two factors seemed tilted against equities: (1) a richly valued U.S. stock market, then trading at 24 times trailing earnings (S&P 500® index) versus a 20-year average p/e of 19.4; and (2) concern that Americans’ personal savings, which ballooned during the pandemic years (2020-2022), would evaporate as pandemic relief wound down, and so too would consumer spending, which accounts for nearly 70% of America’s economy.

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