Taking Stock: Executive Summary December 31, 2024

Q4 In Review:

The U.S. stock market powered higher in 2024, continuing a pretty remarkable bull run.   Q4 started out slow before rallying with a post-election bang following a Trump win, and while markets hit a bit of a speed bump when the Fed indicated reduced expectations for rate cuts, the quarter ended in positive territory, wrapping up another year for the record books.   

The U.S. economy has continued to defy expectations of an economic slow-down since the Fed began raising rates in March 2022.  Here we are, almost three years later, and the economy continues to grow.  Economic indices remain positive, with strong GDP growth, falling inflation, higher than average corporate earnings and healthy unemployment.  All-in-all, 2024 was a year of pleasant surprises, and despite anticipated headwinds, the year brought growth levels that few expected.  

Recent Economic Data:

Gross Domestic Product (GDP).  The GDPNow model estimate for real GDP growth in Q4 2024 is 2.4% (seasonally adjusted annual rate; estimate released January 3, 2025), after increasing at an annual rate of 3.1% in Q3.  (A growth rate between 2% and 3% is commonly considered “normal.”)  

Unemployment.  Total non-farm payroll employment rose by 227,000 in November, and the unemployment rate was little changed at 4.2%, indicating that most U.S. workers continue to enjoy high job security.  Economists largely agree that some unemployment is necessary to 1) allow for turnover as workers seek employment and  training/education opportunities, and 2) provide a balance between a strong job market and stable inflation.  Typically, an unemployment rate between 4% and 6% is considered “healthy,” and in a real-world context, unemployment of 5% or lower is generally considered “full employment.”  

Consumer Confidence.  The Conference Board Consumer Confidence Index, an indication of consumer attitudes and buying intentions, pulled back 8.1% in December, following November’s election optimism.  Stubborn inflation and indications of a slower pace of interest rate cuts, along with concerns regarding potential inflationary impacts from promised tariffs, are weighing on consumers’ minds.   

Consumer Price Index (CPI).   The CPI for All Urban Consumers (CPI-U), a measure of inflation which shows “cost of living” fluctuations, increased 0.3 % on a seasonally adjusted basis, following an increase of 0.2% for the previous four months.  Over the last 12 months, the all-items index increased 2.7% before seasonal adjustment, as the Fed struggles to bring inflation down to its 2% target. 

Earnings.  For Q4, the estimated (year-over-year) earnings growth rate for the S&P 500 is 11.9%  (as of January 3, 2025), down from the September 30 estimate of 14.5%.  If this is the actual growth rate for the quarter, it will mark the highest earnings growth reported by the index since Q4 2021.  And analysts expect 2025 to show even higher earnings, with estimated (year-over-year) earnings growth for 2025 of 14.8%, well above the trailing 10-year average of 8.0%.

Housing.  The 2024 housing market saw a mix of cautious optimism and ongoing challenges, with single-family starts continuing to recover from the pandemic-driven slowdown, albeit at a pace below historical norms.  Privately-owned housing starts in November 2024 were at a seasonally adjusted annual rate of 1,289,000, up from 1,074,000  in April of 2020.  Affordability, due to increased construction costs and higher interest rates, is a significant concern; however, the demand for housing remains strong in many areas.   Builders’ confidence continues to increase, coming in at 46 in December 2024, up from 37 one year ago.   

Looking Ahead:

Wall Street is optimistic about the market’s chances for 2025, but uncertainties exist.   It’s a transition year, and while the new administration is expected to be more “pro-business,” particularly as it pertains to decreased regulation and reduced taxes, President-elect Trump has promised to impose significant tariffs and deport millions of undocumented immigrants, both of which could fuel inflation and reduce consumer spending.

We expect the scale of tariffs touted on the campaign trail (of up to 60%!!) to be reduced and the level of deportations to decrease.  Trump is sensitive to economic and stock market performance and is likely to soften his position, especially if such moves prove economically detrimental.

Time will tell which of the new administration’s policies and agendas will move the needle for the economy, when and how much; however, as we begin 2025 on solid ground, we anticipate another year of steady (but perhaps slower) economic and stock market growth.

On a personal note, we hope you enjoyed a joyous holiday season, and we wish you and your family the very best in the coming year.  May 2025 be filled with happiness and wonder.  

“Wherever life takes us, there are always moments of wonder.”  – Jimmy Carter  **

We are committed to providing you with the highest standard of care in keeping with our corporate mission of 

Building Relationships … Enhancing Lives.

** In memory of Jimmy Carter and in your honor, we donated to Water Mission, an organization dedicated to improving global health by providing access to safe drinking water in more than 57 countries.   2.2 billion people worldwide lack access to life sustaining safe drinking water.  A Georgian peanut farmer turned president, Carter’s impact on global health quite literally changed the world.  His profound ideals and advocacy of peace, environmentalism, human rights and more, made him one of the most admired global leaders of our time.   

Executive Summary Sources:

https://www.atlantafed.org/cqer/research/gdpnow

https://www.bea.gov/news/2024/gross-domestic-product-third-estimate-corporate-profits-revised-estimate-and-gdp-1

https://www.bls.gov/news.release/pdf/empsit.pdf

https://www.bls.gov/opub/mlr/2017/article/full-employment-an-assumption-within-bls-projections.htm

https://www.conference-board.org/topics/consumer-confidence

https://www.bls.gov/news.release/pdf/cpi.pdf

https://advantage.factset.com/hubfs/Website/Resources%20Section/Research%20Desk/Earnings%20Insight/EarningsInsight_010325.pdf

https://insight.factset.com/sp-500-cy-2025-earnings-preview-analysts-expect-earnings-growth-of-15

https://www.census.gov/construction/nrc/pdf/newresconst.pdf

https://www.nahb.org/news-and-economics/press-releases/2024/12/builder-confidence-steady-but-signs-of-future-optimism-in-2025

https://www.nahb.org/news-and-economics/press-releases/2023/12/builder-sentiment-rises-on-falling-interest-rates

https://www.southernliving.com/jimmy-carter-quotes-7976383

https://www.morningstar.com/indexes/dji/!dji/performance

https://www.morningstar.com/indexes/xnas/@cco/performance

https://www.morningstar.com/indexes/spi/spx/performance

https://finance.yahoo.com/quote/%5EDJI/history?p=%5EDJI

https://finance.yahoo.com/quote/%5EIXIC/history?p=%5EIXIC

https://finance.yahoo.com/quote/%5EGSPC/history?p=%5EGSPC

Past performance is not indicative of future results.

The views expressed represent the opinion of Asset Management Financial Solutions, Inc. (“AMFS”) and are subject to change and are not intended as a forecast or guarantee of future results. This material is for informational purposes only. It does not constitute investment advice and is not intended as an endorsement of any specific investment. Statements of future expectations, estimates, projections, and other forward-looking statements are based on available information and AMFS’s view as of the time of these statements.  Accordingly, such statements are inherently speculative as they are based on assumptions that may involve known and unknown risks and uncertainties.