Trust Investment Management
For the stock market, 2024 was another memorable year. Equities kicked off the first quarter with an upbeat tone as the rally broadened. High yield bonds advanced while investment grade and global bonds retreated. Although the second quarter began with concerns over persistent inflation, the general price level for goods softened. The favorable inflation data helped support the markets and allowed the Fed to cut rates later in the year. The third quarter was initially positive until weaker than expected unemployment numbers stoked fears of recession, causing a selloff in August. The selloff was short-lived after earnings reports continued to show resiliency and the Fed confirmed that it was time to begin easing. In September, the Fed followed through with a large 50 basis point rate cut which served as a tailwind for the markets. The U.S. economy continued to show signs of strength in the fourth quarter, a positive for U.S. equities. However, inflation remained elevated, and was a headwind for bonds as yield rose. In December, the Fed telegraphed less rate cuts in 2025 which impeded a Santa Clause Rally. Even so, most markets posted exceptional returns for the year.
The Organization for Economic Cooperation and Development (OECD) released their updated Economic Outlook in December. They stated that “the global economy is projected to remain resilient despite significant challenges.” Challenges such as disruptions in the energy markets due to ongoing conflicts in the Middle East, rising trade tensions, and adverse growth surprises. However, they offered that growth could also surprise on the upside. Improvements in consumer confidence could boost spending. Additionally, an early resolution to major geopolitical conflicts could also improve sentiment, and lower energy prices. The OECD projects global GDP growth of 3.3% in 2025 (2.4% for the U.S.), and 3.3% in 2026 (2.1% for the U.S.). They also expect inflation to ease further.
The economy appears to be on solid footing, and we are cautiously optimistic as we navigate into 2025. Primary drivers of the broader market will continue to include corporate earnings, the economy, and monetary policy.
Thank you so much for allowing us to be a valued part of your financial journey. Happy New Year!
