US Markets
Stocks posted solid gains in Q4 as investors navigated the presidential election, overseas unrest, and Fed rate cuts.
The Standard & Poor’s 500 Index rose 2.07%, while the Nasdaq Composite surged 6.17%. By contrast, the Dow Jones Industrial Average edged up only 0.51%.1
Back and Forth in October
Stocks slipped in October as pre-election jitters hung over trading while solid but not spectacular Q3 corporate reports failed to buoy spirits.2
Middle East tensions unsettled investors early in the month. But as the month progressed, investors took a wait-and-see approach. That bumpy beginning gave way to an upbeat jobs report from the Department of Labor, which boosted stocks. The Fed previously told investors that it’s focused on the jobs market as well as inflation, which elevated the importance of the monthly jobs report.3
Fed, Inflation Grab Headlines in November
Despite a jittery start to November, stocks rallied following Election Day results and gained momentum following the Federal Reserve’s second consecutive interest rate cut. The S&P 500 crossed the 6,000 mark for the first time, while the Dow breached 44,000.4,5
The markets took a breather as investors anxiously awaited fresh inflation data. News that retail and wholesale prices ticked up slightly in October sent markets down, even though both numbers were in line with economists’ expectations. Stocks remained under pressure after unexpected comments from Fed Chair Powell, who said the Fed wasn’t “in a hurry” to cut rates.6
Back to Back Gains for S&P 500
Markets were a mixed bag in the final month as the Dow Industrials and S&P 500 fell, while the Nasdaq posted a modest gain. The Dow was down 12 of the first 13 trading days of the month, including 10 consecutive sessions that marked its longest losing streak since 1974.7
The Fed’s quarter-point cut on December 18 was widely expected. Less expected was Fed Chair Jerome Powell’s signaling of fewer rate reductions next year. Markets fell in response and came under pressure again as a government spending bill appeared to stall in Congress. But a lower-than-expected inflation update boosted the market and helped erase some earlier losses.8,9
Despite the sluggish finish, the S&P 500 ended the year up 23%—its second consecutive gain of more than 20%.10
What Investors May Be Talking About in January
Expect attention to shift to Inauguration Day. Wall Street will be watching to see what policies the White House exacts through executive order and what policies will follow a legislative process.
Updated and stricter tariffs may be implemented quickly by the next administration. Some economists have speculated that the new programs may be inflationary, but others are less concerned, reminding investors that many tariffs have remained in place for the past four years.12
However, overseas trading partners appear to be bracing for fresh tariffs. In mid-December, the European Central Bank—anticipating possible U.S. trade tariffs on goods from Europe—cut interest rates for the third time in as many months. And China has toughened its talk around economic stimulus, promising a more proactive fiscal policy and looser monetary policy in anticipation of trade tensions with the incoming U.S. administration.13,14
World Markets
The MSCI EAFE Index fell 8.38 percent in Q4, starkly contrasting U.S. averages that benefited from post-election and holiday rallies.15
European markets were mixed during the quarter. France fell 3.34%, Spain 2.38%, and the United Kingdom 1.25%. Meanwhile, Germany picked up 3.02% and Italy 1.23%.16
Most emerging markets were under pressure, which accounted for much of the drop in the MSCI EAFE. Brazil dropped 8.75%, Mexico 5.65%, and India 7.31%.17
Pacific Rim markets were mixed thanks to Japan, which picked up 5.21% during the quarter. Elsewhere, China’s Hang Seng Index dropped 5.08%, and Korea’s KOSPI index fell 7.47%.18
The Fed
As expected, the Federal Reserve lowered interest rates by a half percentage point in Q4. The Fed Funds Rate target range ended the year at 4.25–4.50%.
Fed Chair Jerome Powell took the opportunity at both Q4 FOMC meetings to signal less certainty on the pace and timing of rate adjustments in 2025. Following the December meeting, the Fed Chair said, “From here, it’s a new phase, and we’re going to be cautious about further cuts.”28,29
The FOMC’s next meeting is scheduled for January 28–29.
Our blog posts are intended for information purposes only and should not be interpreted as financial advice.
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1. WSJ.com, December 31, 2024
2. Insight.FactSet.com, November 1, 2024
3. WSJ.com, October 4, 2024
4. WSJ.com, November 6, 2024
5. WSJ.com, November 7, 2024
6. Reuters.com, November 14, 2024
7. CNBC.com, December 17, 2024
8. WSJ.com, December 18, 2024
9. APNews.com, December 21, 2024
10. CNBC.com, December 31, 2024
11. SectorSPDRS.com, December 31, 2024
12. TaxFoundation.org, June 26, 2024
13. APNews.com, December 12, 2024
14. WSJ.com, December 9, 2024
15. MSCI.com, December 31, 2024
16. MSCI.com, December 31, 2024
17. MSCI.com, December 31, 2024
18. MSCI.com, December 31, 2024
19. APNews.com, December 19, 2024
20. WSJ.com, December 6, 2024
21. CNBC.com, December 17, 2024
22. Reuters.com, December 17, 2024
23. Reuters.com, December 18, 2024
24. Realtor.com, December 19, 2024
25. Realtor.com, December 23, 2024
26. The Wall Street Journal, December 11, 2024
27. Reuters.com, December 23, 2024
28. The Wall Street Journal, November 7, 2024
29. The Wall Street Journal, December 18, 2024
30. PewResearch.org, January 29, 2024
31. Forbes.com, December 18, 2023
32. Forbes.com, July 9, 2024
33. Entrepeneur.com, April 20, 2024
34. PsychologyToday.com, January 17, 2024
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