2024: Keeping Up With Change – Over the holidays, my family and I enjoyed a Netflix special, featuring comedian Nate Bargatze. In one of his humorous bits, he talks about how hard it is to keep up with change. “I took a typing class in seventh grade,” he tells the audience. “I thought it was a waste of time. In my head, I’m like: ‘Who’s gonna be typing? Cursive is the future!’”

I think we can all relate to Bargatze’s observations. Over the past two decades, the pace of technological change has been staggering (the first iPhone came out in 2007), and shows no signs of slowing. Also, we never know if today’s “it” technology will be the revolutionary game-changer we think it will be. (Remember the battle between Betamax and VHS video formats? Fax machines?)

In short, it can be hard to keep up with all the changes we experience in our lives. Like Bargatze, some days I think I have more in common with the Pilgrims who came over on the Mayflower than I do with my modern-day kids!

As we look back at 2024, it’s easy to see the impact of evolving technology. Artificial intelligence, for example, has become a part of everyday life for many of us – from self-driving cars to process automation.  AI’s remarkable capabilities and transformative potential have sparked industry excitement, promising enhanced productivity and profitability. Clearly, the markets have taken notice. 

These developments can be thrilling, but as an investor, I am reminded that while our tools may evolve, the fundamental principles guiding us should remain steadfast.  At Savant, we employ an evidence-based approach to investing. We don’t rely on crystal balls or forecasts but instead ground our strategies in rigorous research. We aim to build robust portfolios. One of our core values, embedded in this philosophy, is lifelong learning. As markets evolve, so must we—continually studying, adapting, and refining our strategies. We can also take comfort in the fact that we have seen rapid change several times. 

Following is a recap of the significant developments in the capital markets in 2024—a year that adds another chapter to our growing knowledge of navigating an ever-changing investment landscape.

U.S. Economy

Resilience and growth were the keywords to describe the U.S. economy in 2024. Despite forecasts of a potential recession resulting from high interest rates and global economic uncertainties, the U.S. economy saw significant growth in real Gross Domestic Product, or GDP, with the third quarter showing a 3.1% annual increase. (Early estimates suggest strong continued growth for the fourth quarter as well.)

The pace of inflation slowed throughout the year but remained above the Federal Reserve’s 2% target. In November, the Consumer Price Index (CPI) slowed to 2.7%, a gradual decline from previous highs. Labor markets also showed resilience despite the unemployment rate increasing slightly to 4.1% in December.  This percentage is still low relative to historical standards, and employers created over 2.2 million new jobs in 2024. Wage growth outpacing inflation supported real incomes, and labor force participation held steady. With confidence in the slower pace of inflation and a desire to keep the economy strong, the Federal Reserve made a significant monetary policy shift in September, cutting rates by 50 basis points to 4.75%-5.00%. Two additional .25% cuts in November and December brought the rate to 4.25%–4.50%, totaling 100 basis points of easing aimed at balancing moderating inflation against ongoing employment concerns.

We don’t pretend to know what will happen with the economy in 2025 as many others do. Still, it’s worth noting that unforeseen events can render even the most thoughtful forecasts irrelevant (remember 2020!).  Forecasters often miss the mark, underscoring the uncertainty of short-term market movements, which is why we emphasize constructing resilient, well-diversified portfolios rather than relying on predictions.

It seems that roughly half of Americans will always have apprehension about a political change or a new incoming administration; amazingly, that is just how politics have gone for some time. Policy differences between the outgoing and incoming administrations are pretty significant. While there are many issues markets care about, the uncertainties with tariffs may be one of the more prominent factors.  However, some believe trade negotiations will result in a more moderate outcome than what is telegraphed through political rhetoric.  The economy still has momentum, and while uncertainties and volatility are ever-present, these risks have allowed us to earn positive market returns over time.

Stocks

Global stocks (MSCI All Country World IMI Index) rose 16.3%, led by strong performance in U.S. stocks. The S&P 500 hit 57 record highs and ended the year up 25%; its second consecutive 20%-plus gain. Mega-cap technology led the surge with excitement around AI, but gains were broad-based across geographies and market caps. Small stocks (Russell 2000 Index) and emerging market stocks (MSCI Emerging Markets Index) rose by 11.5% and 7.5%, respectively. In contrast, international large stocks (MSCI EAFE Index) were up by 3.8%, constrained by U.S. outperformance and a strong dollar.

Bonds

Bond markets saw volatility in 2024, with yields rising more than expected even as the Fed cut the short-term rate. The 10-year Treasury yield climbed from 3.95% to 4.58% on inflation and deficit worries, while the 2-year Treasury yield remained nearly flat, starting at 4.33% and ending at 4.25%. Although the yield curve was inverted for much of the year, signaling economic concerns, it later normalized as longer-term yields rose. U.S. intermediate-term bonds (Bloomberg U.S. Aggregate Bond Index) were up 1.2%. International bonds (Bloomberg Global Aggregate ex USD Index) outperformed, gaining 5.0%, while TIPS (Bloomberg Global Inflation Linked U.S. TIPS Index) rose 1.8%.

While interest volatility may persist, higher yields mean higher future returns. For the first time in a while, there’s an allure to steadily high bond income vs. the potential growth in stocks. Investor sentiment can change to where “a bird in the hand” is more attractive than “two in the bush.”

Alternatives

Alternatives provided valuable diversification in a turbulent year for stocks and bonds. Reinsurance (SwissRe Global Cat Bond Index) had a great year, up 17.3%. Direct lending (Cliffwater Direct Lending Index) and multi-strategy ( Credit Suisse Multi-Strategy) also posted positive returns, finishing up 10.8% and 4.0% respectively. Real assets (DJ Brookfield Gbl Infrastructure Index) were slightly up 0.7% and on the negative side, trend following (Credit Suisse Managed Futures Liquid Index) was down 5.7%.

Looking Ahead

As we move 2024 to the history books and look toward 2025, I leave you with three core takeaways from our evidence-based investment philosophy:

  1. Markets work: Trust in people and markets’ inherent creativity and resilience.  While unpredictable, patient investors aim to capture the returns when they come.  
  2. Control the controllable: Focus on what we can control, such as costs and taxes. The key is to try to keep as much of the returns the markets give us as possible.
  3. Diversification is our friend: While we often see different market areas provide outsized returns, we know spreading risk is essential to long-term success.

We believe these principles are timeless reminders of how to stay grounded in an uncertain future. While the path ahead is unpredictable, my optimism is unwavering. People—and, by extension, markets—are resilient and innovative, continually striving toward a brighter future.

Here’s to a prosperous 2025, as we look forward to embracing even more change ahead.

(Source: Morningstar Direct. Data as of 12/31/2024. For index information, visit www.savantwealth.com/index_disclosures.)

Historical performance results for investment indices, benchmarks, and/or categories have been provided for general informational/comparison purposes only. Past performance may not be indicative of future results. Different types of investments involve varying degrees of risk. Therefore, it should not be assumed that future performance of any specific investment or investment strategy, including the investments and/or investment strategies recommended and/or undertaken by Savant, or any non-investment related services, will be profitable, equal any historical performance levels, be suitable for your portfolio or individual situation, or prove successful.

Author C. Zach Ivey Chief Investment Officer CFA®, CFP®, MBA

Zach has been involved in the financial services industry since 2001. He is a member of the Chartered Financial Analyst Society of Alabama and the Financial Planning Association.

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Savant Wealth Management (“Savant”) is an SEC registered investment adviser headquartered in Rockford, Illinois. Past performance may not be indicative of future results. Different types of investments involve varying degrees of risk. Therefore, it should not be assumed that future performance of any specific investment or investment strategy, including the investments and/or investment strategies recommended and/or undertaken by Savant, or any non-investment related services, will be profitable, equal any historical performance levels, be suitable for your portfolio or individual situation, or prove successful. Please see our Important Disclosures.