2024 Was A Roaringly Good Year For Stocks

This is the time of year when we all wish one another a healthy, happy, and prosperous new year. The past two years were certainly prosperous ones for equities investors, as the S&P 500 rose 23.3% following a 24.2% gain in 2023. Those gains more than offset the 19.4% loss during 2022. On average, the S&P 500 is up 9.4% per year over the past three years, consistent with its long-run average growth rate of 7.2% (chart). Of course, accounting for dividends, returns are even higher than that performance suggests.

Three consecutive years of double-digit gains don't happen too often. Nevertheless, that’s what we are expecting: We see the S&P 500 increasing 19.0% this year to 7000. However, we think it could be a bumpier ascent than in recent years, especially during the next couple of months. Fed officials are likely to be less dovish in the coming weeks. In addition, uncertainty about fiscal, trade, and immigration policies might continue to put upward pressure on bond yields.