We hope everyone is enjoying an outstanding holiday period with family and friends. As this will be our last update before 2025, let us be the first to wish you a happy and healthy New Year. As this year comes to an end, we thought it would be interesting to look back at some interesting stats with the power of hindsight. So, without further ado, let’s take a look.
Performance After a 20% Up Year. The S&P 500’s 24.2% gain in 2023 was the best annual gain for the index since 2021. Since 1928, the index’s average annual performance following a 20%+ yearly gain was +6.7%, with positive returns 68% of the time. This is another example of how unpredictable the market can be, as the S&P 500 crushed the average, up over 20% again in 2024.
S&P Additions. Super Micro Computer (SMCI) joined the S&P 500 on Monday, March 18th. Over the last 20 years, stocks added to the S&P 500 were up in price 85.7% of the time in the year leading up to their addition, but they rose just 59.7% of the time in the year after going in. Since SMCI became a member of the S&P 500, it has fallen by 66%.
No “Stag” or “Flation”. At his press conference following the May 1st Fed decision, Chair Powell rejected “stagflation” narratives by citing solid growth, low unemployment, and manageable inflation, meaning the U.S. doesn’t “have the stag or the flation.” Since May, CPI inflation has receded, however, since hitting the low of 2.4% in September, it has climbed back to 2.7%.
Halftime. In years like 2024, when the S&P 500 was up more than 10% in the first half, the index saw a median gain of 9.6% in the second half, with gains 76% of the time. In all other years, the median second-half gain was less than half that at just 3.6%. History has repeated this year, as the second half of the year has been just as strong, outperforming average July-December numbers.
Wrong Way Rates. The week after the Fed’s 50-basis point rate cut, the 10-year Treasury Yield increased from 3.65% on 9/17 to 3.73% on 9/24. In the eight prior rate cut cycles since 1984, the only two times the 10-year yield rose in the week after the first cut were in January 2001 and September 2007. The 10-year Treasury has continued to rise to 4.6% since then. Experts say the bond market is pricing in a higher liklihood of sticky inflation.
Extreme Bullishness. Bank of America’s Global Fund Manager Survey for December showed that a record 36% of respondents said they are overweight U.S. equities. Cash allocations dropped to 3.9%, the lowest level since June 2021. It will be interesting to see how this plays out, as these types of metrics can be seen as contrarian indicators.
Markets / Economy
- Markets shrugged off the FOMC news from the week prior to move slightly higher. The S&P was up 0.7%, the Nasdaq was up 0.8%, and the small-cap Russell 2000 was up 0.1%.
- The Conference Board Consumer Confidence Index® declined by 8.1 points in December to 104.7 (1985=100). The Present Situation Index—based on consumers’ assessment of current business and labor market conditions—fell 1.2 points to 140.2.
- The Expectations Index—based on consumers’ short-term outlook for income, business, and labor market conditions—tumbled 12.6 points to 81.1, just above the threshold of 80, which usually signals a recession ahead.
Stocks
- U.S. equities were in positive territory. Energy and Healthcare were the top performers, while Materials and Consumer Staples lagged. Value stocks led growth stocks, and large caps beat small caps.
- International equities closed higher for the week. Emerging markets fared better than developed markets.
Bonds
- The 10-year Treasury bond yield increased nine basis points to 4.62% during the week.
- Global bond markets were in negative territory this week.
- High-yield bonds led for the week, followed by corporate bonds and government bonds.
