Despite ongoing geopolitical and economic turmoil around the world, the stock and bond markets finished 2024 with substantial gains. Vanguard’s US total stock market fund rose 23.7% for the year, the developed country index fund was up 3.1%, and the developing country index increased 10.6%.
Interest rates also rose, with the benchmark 10-year Treasury up to 4.53% from 3.97% at the end of 2023. Prices on bond funds declined somewhat (interest rates and bond prices move in opposite directions), but with the higher rates, bond funds still gained in 2024. Vanguard’s intermediate-term fund rose 1.5%, while the high-yield bond fund was up 6.4%.
The 2024 gains followed even stronger returns in 2023, continuing the recovery from the dismal returns for both stocks and bonds in 2022.
As you know, Park Piedmont takes a very dim view of predictions, so we won’t make any here. We do know, however, that 2025 will likely present a number of opportunities and challenges, with a new administration in the US pursuing much different policies than its predecessor.
Here are a few of the issues we will be watching closely:
- President Trump’s tariff and tax proposals: What form will these take? Will they be enacted in full or parts? Will whatever passes lead to additional growth in the US, further inflation, or some of both? How will any changes impact economies and markets in the rest of the world?
- Immigration: Will the “mass deportation” proposed by the incoming administration actually happen? How much opposition will there be from business interests and immigrant advocates? What will the impacts be of whatever changes are enacted?
- Federal Reserve independence: Will the Fed continue to pursue interest rate and employment policies without political interference?
- “Magnificent 7”: Apple, Microsoft, Nvidia, Amazon, Google, Meta, and Tesla led the stock market gains in 2024. Will that continue in 2025 and beyond?
- Crypto: Bitcoin soared at the end of 2024 on the hope of reduced regulations and additional support from the new administration. How much volatility will there be in these cryptocurrencies going forward?
As always, please feel free to check in with your Park Piedmont advisor with any questions or concerns as we move into the new year.