Q4 2024 Commentary

The fourth quarter of 2024 saw the U.S. economy continue its resilient performance, defying earlier expectations of a slowdown and setting the stage for a "soft landing" as we enter 2025. Despite ongoing challenges, key economic indicators and market performance painted a picture of strength and stability.

Economic Growth and Labor Market

The U.S. economy remained resilient in Q4 2024, with GDP growth tracking above expectations. This upward revision was largely driven by robust consumer spending, particularly evident in record-breaking Black Friday and Cyber Monday sales.

The labor market remained somewhat tight, with the unemployment rate ticking up slightly but still hovering near historic lows. Job gains accelerated in the September-November period compared to the previous three months, indicating continued strength in employment. Initial jobless claims remain close to historic lows.  This resilience in the job market has been a key factor in sustaining consumer confidence and spending. 

Equity Markets

The stock market ended 2024 on a high note, with the Dow Jones Industrial average returning 14.82%, the iShares Core Growth Allocation returning 10.67% (AOR), and the S&P 500 returning an impressive 24.89% gain for the year.  Developed international equities (EFA) dramatically lagged, with the EFA ETF returning 3.51%. This marked the second consecutive year of 20%-plus returns for S&P 500 index, a rare feat.

Market performance remained concentrated, with the so-called "Magnificent 7" stocks (Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia, and Tesla) accounting for more than 100% of the S&P 500's return in Q4. This concentration has raised concerns about market breadth and the potential for a broader rally in 2025.

Looking Ahead to 2025

As we move into 2025, several key themes are emerging:

Soft Landing Scenario: The consensus view is leaning towards a "soft landing" for the U.S. economy, with GDP growth expected to moderate to 1.8% in 2025. Inflation has been trending lower, but is still sticky modestly above the FOMC’s 2% target.

Policy Shifts: The new administration's policies, particularly around tariffs and immigration, are expected to create moderate impacts across various industries. These shifts could introduce both opportunities and challenges for businesses and investors.  Small business optimism has spiked, but stocks tend to be choppy post inauguration in the first year of a presidency.

In conclusion, the U.S. economy and markets demonstrated remarkable resilience in Q4 2024, setting a positive tone for 2025. While challenges remain, including persistent inflation and geopolitical uncertainties, the overall outlook suggests a cautiously optimistic stance for investors as we enter the new year.

Thank you for your trust and confidence,

David M. Borowsky

Founder & Managing Partner

Director of Investments