In the final trading day of 2024, US stocks experienced a modest rebound, marking a fitting conclusion to an otherwise tumultuous year. Despite a sluggish end to the year, major indexes still managed to post impressive gains for 2024. The S&P 500 saw a rise of approximately 23.8%, while the tech-heavy Nasdaq Composite surged nearly 30%. The Dow Jones Industrial Average, although growing at a slower pace, still achieved a respectable 13% gain. Key factors driving these gains included advancements in artificial intelligence and a surge in cryptocurrency values. However, the last week saw markets relinquishing some of their earlier gains, deviating from the typical year-end rally.
Meanwhile, significant shifts occurred in commodities and cryptocurrencies. Gold prices climbed over 27%, heading towards its best yearly performance since 2010. Bitcoin also witnessed a remarkable rally, increasing by more than 100% this year, despite retreating from its recent peak. The Federal Reserve's interest rate cut and President-elect Trump's policies further influenced market dynamics, setting the stage for potential clashes in 2025.
Stock Market Performance in 2024: A Year of Resilience
The stock market demonstrated remarkable resilience throughout 2024, with notable gains across key indexes. The S&P 500 and Nasdaq Composite led the charge, driven by robust performances in technology and artificial intelligence sectors. While the Dow Jones Industrial Average lagged slightly, it still posted solid growth. The year was characterized by both highs and lows, but overall, investors enjoyed substantial returns. The final trading day saw a slight recovery, capping off a year marked by unprecedented market activity.
Throughout 2024, the S&P 500 and Nasdaq Composite were buoyed by the "Magnificent Seven" stocks, which played a pivotal role in driving the market's upward trajectory. These companies, predominantly involved in artificial intelligence, attracted significant investment. The broader market also benefited from this bullish momentum. However, the last few weeks saw a deviation from the expected year-end rally, with markets giving up some of their gains. This unusual trend highlighted the unpredictable nature of the financial markets. Despite this, the overall performance remained strong, reflecting the underlying strength of the economy and investor confidence.
Federal Reserve and Trump: Potential Policy Conflicts Ahead
The interplay between monetary policy and political leadership became increasingly prominent as 2024 drew to a close. The Federal Reserve made its first interest rate cut in four years, a move that had significant implications for the economy. Meanwhile, President-elect Donald Trump's impending return to the White House introduced new uncertainties. The combination of these factors set the stage for potential conflicts in 2025. Trump's economic policies could lead to higher inflation, prompting the Fed to reconsider its stance on interest rates. Additionally, there were concerns about the new administration's intentions regarding the Fed's independence.
Potential scenarios include increased inflation due to Trump's policies, which could force the Fed to tighten monetary policy. Another possibility is the new administration making efforts to limit the Fed's autonomy. Elon Musk, a known ally of Trump, even suggested that the central bank is overstaffed, hinting at potential workforce reforms. Federal Reserve Chair Jay Powell acknowledged the uncertainties surrounding Trump's proposed policies, noting that they are being factored into policy assumptions. The coming year promises to be a critical period for assessing the balance between political influence and monetary policy, with significant implications for the financial markets.