Our Quarterly Market Review features world capital market performance and a timeline of events for the past quarter. It begins with a global overview, then features the returns of stock and bond asset classes in the US and international markets. We wrap things up with a quarterly topic or theme we feel is important to share.
FOURTH QUARTER 2024
KEY TAKEAWAYS
Quarterly Market Summary
World Stock Market Performance
Randomness of Returns
QUESTION OF THE QUARTER
How do you choose the investments in my portfolio?
MARKET COMMENTARY
Fixed Income
US Stocks
International Developed Stocks
Emerging Markets Stocks
Country Returns
WARREN BUFFETT
FOURTH QUARTER 2024
Lessons from 2024: Just Keep Diversifying
Predictions are fun, but they’re also kind of useless. In fact, nearly half of investment analysts predicted the stock market to finish in negative territory last year. Whether it’s interest rates, geopolitical events, or elections, the market is always recalibrating. Diversification and discipline are the real winning strategies for long-term success.
A Lackluster 4Q Caps Off a Strong 2024.
All in all, the fourth quarter brought its usual blend of twists and turns, but the market kept marching forward. It’s a fitting reminder that patience often weathers the storm – and sometimes even allows us to enjoy the ride.
Volatility Returns Like a Bad Sequel.
After a surprisingly calm September, October decided to rattle everyone’s nerves – again. Volatility spiked to levels reminiscent of the mid-summer surge, reminding investors (as if we’d forgotten) the path is rarely a straight line. The market swiftly found its footing by mid-November, but those brief dips into the red served as a timely reminder: volatility is the price we pay for higher returns.
’Tis the Season for Rate Cuts?
The Federal Reserve cut interest rates not once, not twice, but three times – moves largely in line with expectations. Meanwhile 10-year Treasury yield didn’t seem to care and climbed over 4.5%.
Global Markets in 2024: Not Too Shabby
The MSCI All Country World Index (fancy name for a solid benchmark) gained a respectable 17.5%, with US stocks leading the charge. Meanwhile, geopolitical tensions were doing their thing, keeping everyone on edge.
Still Shining, With An Occasional Flicker Tech giants continued to dominate headlines. While they didn’t repeat the run from earlier in the year, their collective performance in the fourth quarter provided a healthy boost to the major indices. Like balloons at a New Year’s Eve party, it’s fun when they’re fully inflated, but we’re reminded how quickly the air can leak out.
Bonds? A Mixed Bag.
The overall US bond market managed to eke out a tiny gain (1.3%), but 10-year Treasuries didn’t feel like playing nice. And, yes, the yield curve flattened, just to keep us all guessing about what’s next.
It’s Prediction Season: 2025 is Here.
As we head into 2025, remember this: Markets are a testament to human ingenuity and progress, even when the headlines get weird. So, buckle up, stay invested, and let’s see what this year has in store.
Fourth Quarter 2024 Index Returns
US Stock Market International Developed
Markets
ot reflect the expenses associated with the management of an actual portfolio. Market segment (index representation) as follo ws: Bond Index, US Stock Market (Russell 3000 Index), International Developed Stocks (MSCI EAFE Index), Emerging Markets Fran k Russell Company is the source and owner of the trademarks, service marks, and copyrights related to the Russell Indexes.
MSCI All Country World Index with selected headlines from 2024
"US Border Deal Is Declared Dead"
"US Inflation Edged Up in December After Rapid Cooling Most of 2023"
"US Senate Approves Measure Averting Government Shutdown"
"Bitcoin Funds Pull In Money at Record Pace"
"Dow, S&P 500, Nikkei Surge to Records after Nvidia’s Blockbuster Earnings Spark Global Rally"
"Stock Indexes Book Records after Inflation Eases"
"Iranian President Ebrahim Raisi Killed in Helicopter Crash"
"Major Tech Outage Grounds Flights, and Businesses
"ECB Cuts Interest Rates First Time since 2019" "US Housing to a Four-Year
"US Job Market Was Weaker Than Previously Reported, Data Show" "The Fed's Bold Move Jolts Global Markets" "China Tries to Jolt Ailing Economy" "US Economic Growth Extends Solid Streak"
"Congress Approves Revised Plan to Avert Government Shutdown"
"Israel Approves CeaseFire With Hezbollah Aimed at Ending Lebanon Conflict"
"Trump Defeats Harris, Marking Historic Comeback" "Fed Cuts Rates Again, This Time by a Quarter Point"
“Stocks Cap Best Two Years in a Quarter-Century" starting January 2000. actual portfolio. Past performance is not a guarantee of future results.
reflect the expenses associated with the management of an actual portfolio. See Disclosures for additional details.
QUESTION OF THE QUARTER
Andrew Miller, CFP® Founder & CEO
This is such a great question! Each quarter this year, we're going to answer the question, "How do you choose the investments in my portfolio?" While it's better in pieces, as a lot goes on behind the scenes, we'll cover it all (i.e., our investment approach and philosophy).
INVESTMENT OBJECTIVE:
Your investment strategy is about you. Financial planning helps us answer, "What do you need your money to do for you?". Does that mean financial planning is the most essential part of the process? Yes.
Your investment experience is as unique as your fingerprint, and your strategy should be too. Once we know what your money needs to do for you, we can start prioritizing specific investment goals and discussing your comfort with risk.
Combining your financial situation and personal preferences, we'll know whether your investments should be conservative, aggressive, or somewhere between.
Then, we move to the next step.
ASSET ALLOCATION:
When it comes to building a successful investment strategy, research shows not all factors contribute equally. Most of an investor's long-term success comes from one key decision – how their money is allocated (92%). To clarify, this refers to the swings – the ups and downs, not total returns or "success" in achieving the highest possible returns.
Asset allocation is where diversification comes in – not holding all your eggs in one basket. We start by evaluating various asset classes, such as cash, bonds, stocks, real estate, commodities, etc. Then we decide how much to own of each, if any. We intentionally choose how your investment allocation aligns with and helps you accomplish your goals.
INVESTMENT SELECTION:
Now that we’ve determined the asset allocation percentages for each asset class, the focus shifts to how they should be represented. This involves selecting the specific investments – like stocks, bonds, mutual funds, or exchange traded funds (ETF) – to build your "pie." Think of it as choosing the varieties of pie: apple, pecan, or pumpkin, ensuring you have a complete, well-proportioned dessert.
Efforts to "beat the market" through timing or investment selection should take a back seat to maintaining a disciplined and diversified portfolio. While investment selection does play a role, history shows that its impact on returns is much smaller compared to the influence of asset allocation. By staying diversified globally, you’re better positioned to capture returns no matter which asset class takes the lead each year.
PORTFOLIO MANAGEMENT
Markets fluctuate, which can shift your portfolio's asset allocation away from its target. We know this is important because it represents 92% of your success. Regularly rebalancing your investments allows us to maintain your desired risk level and take advantage of opportunities like reinvesting dividends and tax-loss harvesting. You already know, but this is where buy low –sell high part comes into play.
Without trying to time the market, we consider the economic environment, interest rates, inflation, etc. We know each of these can be a factor, but we're confident you'll still have the money for the down payment on your new house, or the tuition due in six months because your investment strategy includes safer investments for those.
FOURTH QUARTER 2024
Key Takeaways
• The Federal Reserve cut interest rates in November (by 0.25%) and December (by 0.25%), bringing their target range to 4.25%–4.50%.
• Investment-grade and high-yield corporate bonds delivered strong returns, supported by improving credit fundamentals and economic growth.
• International bonds benefited from weaker US dollar trends and easing monetary policies in some major economies.
Interest Rates Across Issuers (%)
US Treasury Yield Curve
12/31/24
12/31/23
12/31/19
Period Returns
Past performance is not a guarantee of future results. Indices are not available for direct investment. Index performance does not reflect the expenses associated with the management of an actual portfolio. See Disclosures for additional details.
FOURTH QUARTER 2024
Key Takeaways
• The US stock market posted positive returns for the quarter and outperformed both international developed and emerging markets.
• Value underperformed growth.
• Small cap stocks underperformed large caps.
Mid Cap Growth
Large Cap Growth
Large Cap Marketwide
Small Cap Growth
Mid Cap
Small Cap
Small Cap Value
Mid Cap Value
Large Cap Value
Period Returns
Past performance is not a guarantee of future results. Indices are not available for direct investment. Index performance does not reflect the expenses associated with the management of an actual portfolio. See Disclosures for additional details.
FOURTH QUARTER 2024
Key Takeaways
• Developed markets outside of the US posted negative returns for the quarter and underperformed the US stock market but outperformed emerging markets.
• Value stocks outperformed growth stocks.
• Small cap stocks underperformed large caps.
World Market Capitalization
Large Cap Value
Mid Cap Growth
Mid Cap
Mid Cap Value
Marketwide
Large Cap
Small Cap Growth
Small Cap
Small Cap Value
Large Cap Growth
International Developed $21.1 trillion Ranked Returns
Period Returns
Cap
Past performance is not a guarantee of future results. Indices are not available for direct investment. Index performance does not reflect the expenses associated with the management of an actual portfolio. See Disclosures for additional details.
FOURTH QUARTER 2024
Key Takeaways
• Emerging markets posted negative returns for the quarter and underperformed both US and international developed stocks.
• Value stocks underperformed growth.
• Small caps stocks outperformed large caps.
Ranked Returns
Small Cap Growth
Large Cap Growth
Small Cap
Large Cap
Small Cap Value
Marketwide
Mid Cap Growth
Mid Cap
Mid Cap Value
Large Cap Value
World Market Capitalization
Emerging Markets
$9.0 trillion
Period Returns
Annualized Returns
Cap
Past performance is not a guarantee of future results. Indices are not available for direct investment. Index performance does not reflect the expenses associated with the management of an actual portfolio. See Disclosures for additional details.
Past performance is no guarantee of future results. Country returns are the country component indices of the MSCI All Country Wo All Country World Index. MSCI index returns are net dividend. Indices are not available for direct investment. Their performance does Frank Russell Company is the source and owner of the trademarks, service marks and copyrights related to the Russell Indexes. Se
Past performance is no guarantee of future results. This information is intended for educational purposes and should not be considered a recommendation to buy or sell a particular security.
Investment advisory services are offered through OLIO Financial Planning, LLC (“OLIO”). This communication is not to be directly or indirectly interpreted as a solicitation of investment advisory services to residents of another jurisdiction unless otherwis e permitted. The contents of this communication and any accompanying documents are confidential and for the sole use of the recipient. They ar e not to be copied, quoted, excerpted or distributed without express written permission of the author. The underlying data has been obtained from sources considered to be reliable: the information is believed to be accurate, but there is no assurance that it is so.
CHANGES TO YOUR SITUATION
Please inform us of any changes to your financial situation, your goals, tolerance for investment risk or other matters relat ing to your personal finances. Please notify us in the future if there are ever any changes to your financial situation or investment obj ectives.
IMPORTANT NOTES
Source: YCharts as of 09/30/2024. YCharts, Inc. (“YCharts”) is not registered with the U.S. Securities and Exchange Commission (or with the securities regulatory authority or body of any state or any other jurisdiction) as an investment adviser, broker -dealer or in any other capacity, and does not purport to provide investment advice or make investment recommendations by or through the conten t (the “Content”) found on ycharts.com (the “Site”) or otherwise. The Site and the Content are provided for the sole purpose of enab ling users to conduct investment research. Other uses of the Site and the Content are expressly prohibited.
For further information regarding the use of this report, please go to: ycharts.com/about/disclosure.
Indices are not available for direct investment. Their performance does not reflect the expenses associated with the manageme nt of an actual portfolio. Past performance is not a guarantee of future results. Index returns are not representative of actual portf olios and do not reflect costs and fees associated with an actual investment. Actual returns may be lower.
Cash Equivalents: The Bloomberg U.S. Treasury Bills: 1-3 Months Index tracks the market for treasury bills issued by the U.S. government with time to maturity between 1 and 3 months. US Treasury bills are issued in fixed maturity terms of 4, 8, 13, 17, 26 and 52 weeks. The U.S. Treasury Bills: 1 -3 Months Index is a component of the US Short Treasury Index.
Short-Term Bonds: The Bloomberg US Government/Credit 15 Year Index applies the rules of the Bloomberg 1 -5 Yr Gov/Credit Index, which tracks USD-denominated, investment grade, fixed-rate bonds, including treasuries, governmentrelated and corporate issues, with at least one, and up to, but not including, five years until final maturity.
Intermediate-Term Bonds: The Bloomberg US Aggregate Bond Index is a broad-based flagship benchmark that measures the investment grade, US dollar denominated, fixedrate taxable bond market. The index includes Treasuries, government-related and corporate securities, fixed rate agency MBS, ABS and CMBS (agency and non-agency). Provided the necessary inclusion rules are met, US Aggregate -eligible securities also contribute to the multi -currency Global Aggregate Index and the US Universal Index.
Long-Term Bonds: The Bloomberg US Long Government/Credit Total Return Index tracks non -securitized securities including investment grade, treasuries, and government/corporate securities. This index can serve as a benchmark for a portfolio or set of securities that contain fixed income exposure that matches the characteristics of this index.
Corporate Bonds: The Bloomberg US Corporate Index covers performance for United States corporate bonds. This index serves as an important benchmark for portfolios that include exposure to investment grade corporate bonds.
High Yield Bonds: The Bloomberg US Corporate High Yield Index covers performance for United States high yield corporate bonds. This index serves as an important benchmark for portfolios that include exposure to riskier corporate bonds that might not necessarily be investment grade.
Municipal Bonds: The Bloomberg Municipal Index serves as a benchmark for the US municipal bond market. Investors will use this index to benchmark against portions of their portfolio that are allocated in fixed income securities.
Treasury Bonds: The Bloomberg US Treasury is a benchmark for the United States treasury bond.
TIPS: The Bloomberg US TIPS Total Return index measures US Treasury Inflation Protected securities.
Global Bonds ex US: The Bloomberg Global Aggregate exUSD Index measures the performance of global investment grade bonds. This index does not include bonds from the US. This characteristic allows this index to serve well for tracking international bond exposure.
Emerging Market Bonds: The Bloomberg Emerging Markets USD Aggregate Bond Index is a flagship hard currency Emerging Markets debt benchmark that includes fixed and floating-rate US dollar-denominated debt issued from sovereign, quasi-sovereign, and corporate EM issuers. Country eligibility and classification as Emerging Markets is rules-based and reviewed annually using World Bank income group and International Monetary Fund (IMF) country classifications.
US Stocks: The Russell 3000 Index is a capitalizationweighted stock market index, maintained by FTSE Russell, that seeks to be a benchmark of the entire U.S stock market. It measures the performance of the 3,000 largest publicly held companies incorporated in America as measured by total market capitalization and represents approximately 98% of the American public equity market.
International Stocks: The MSCI ACWI ex USA index covers the major developed and emerging market countries. However, it does not include the United States stock market. This is in an important benchmark for investors analyzing how the markets outside of the United States are doing.
Emerging Market Stocks: The MSCI Emerging Markets Index captures large and mid-cap representation across 25 Emerging Markets (EM) countries. The index covers approximately 85% of the free float-adjusted market capitalization in each country.
Commodities: The Bloomberg Commodity Total Return index is composed of futures contracts and reflects the returns on a fully collateralized investment in the BCOM. This combines the returns of the BCOM with the returns on cash collateral invested in 13-week (3 Month) U.S. Treasury Bills.
Real Estate: The S&P Global REIT serves as a comprehensive benchmark of publicly traded equity REITs listed in both developed and emerging markets.
