Financial markets are poised to end 2024 on an upbeat note, with U.S. stock futures indicating gains in early Tuesday trading. This comes after Monday’s significant pullback, where the S&P 500 declined 1.06% amid year-end profit-taking and investor concerns about future economic uncertainties.
Despite yesterday’s retreat, the S&P 500 remains on track for an impressive 25.2% annual gain, marking its strongest performance since 2021. However, market analysts caution that replicating such robust returns may prove challenging in the coming year.
LPL Financial’s chief equity strategist Jeffrey Buchbinder notes that the favorable conditions that propelled stocks higher throughout 2024 might be harder to find in the upcoming year, citing persistent inflation concerns, rising interest rates, and significant
geopolitical risks as potential headwinds.
The bond market is emerging as a crucial factor for equity performance in the year ahead, particularly as U.S. debt approaches $40 trillion and inflation continues to exceed the Federal Reserve’s 2% target. Treasury yields have shown recent stability, with the benchmark 10-year note trading at 4.521% and 2-year notes at 4.241% ahead of New York trading.
Pre-market indicators suggest a positive opening, with S&P 500 futures pointing to a 22-point gain and Dow Jones Industrial Average futures indicating a 156-point advance. The tech-heavy Nasdaq, which has surged 29.8% this year, is expected to open 107 points higher, with notable activity in shares of Tesla, Nvidia, and MicroStrategy.
European markets are showing mixed performance in abbreviated New Year’s Eve trading sessions. The Stoxx 600 has dipped 0.27% in Frankfurt, heading toward its weakest quarterly performance in two years with a modest annual gain of 5.4%. London’s FTSE 100 has managed to climb 0.52% in its half-day session but is also posting a relatively modest year-to-date increase of 5.7%.
Asian markets ended the year on a subdued note, with Japan’s Nikkei 225 closed for the traditional New Year holiday. The broader MSCI ex-Japan index declined 0.52%, bringing its full-year advance to approximately 8%.
Looking ahead, market observers are closely monitoring several key factors that could influence trading patterns in 2025. These include the Federal Reserve’s monetary policy decisions, ongoing inflation trends, and potential geopolitical developments. The relationship between government debt levels and market performance remains a particular focus for investors.
The remarkable gains of 2024 have been driven largely by optimism surrounding technological advancement, particularly in artificial intelligence, as well as resilient corporate earnings and signs of moderating inflation. However, questions persist about the
sustainability of such growth rates given the complex economic landscape ahead.
As traders prepare for the final session of 2024, the year’s strong performance serves as a reminder of market resilience in the face of various challenges. Yet, the combination of high valuations, persistent inflation concerns, and uncertain monetary policy trajectory suggests that investors may need to adjust their
expectations for returns in the coming year. The market’s ability to navigate these challenges while maintaining momentum will likely be a defining theme as we enter 2025.