stock market went up Achieve the highest marks in 2024, extending the banner’s profits achieved in the previous year
SThe &P 500 — the index of most people’s 401(k)s — is up nearly 28% this year as of Monday.
The high-tech Nasdaq rallied a staggering 34% during that period; The Dow Jones Industrial Average rose 16%.
Back-to-back years of strong stock market performance have posed a conundrum for forecasters: will high stock prices scare away investors in 2025, or will it give stocks even more momentum?
Experts have attributed this year’s rise in stock prices to a set of favorable trends: A strong economy growth, the illusion about artificial intelligence and the long awaited start Federal Reserve interest rate cuts.
Those tailwinds are expected to continue pushing stocks skyward into 2025, experts said, but they warned of more uncertainty than usual that could prevent or even exacerbate further gains. Stocks’ biggest unknown of 2025, they said: President-elect Donald Trump.
“As we close the books on 2024 and look into 2025, perhaps the uncertainties this time around are greater than usual,” said Kevin Gordon and Liz Ann Sonders, investment strategists at Charles Schwab. he said last week “Good luck figuring this out.”
Good news has abounded for the stock market this year, partly because the economy defied its naysayers.
The economy continued to grow in 2024, while inflation fell. That performance kept the U.S. on track.”soft landing,” where the economy avoids a recession while inflation returns to normal.
gross domestic product grow up at a solid annual rate of 2.8% in the three months ending September, the latest period for which data is available.
“The strength of the US has not waned,” Seema Shah, chief global strategist at Principal Asset Management, told ABC News in a statement.
Inflation has slowed dramatically from a peak of over 9% in June 2022. A months-long advance earlier this year helped push the Federal Reserve toward its first interest rate cuts in four years.
In recent months, the Fed has cut its benchmark rate by three-quarters of a percentage point, delaying the fight against inflation and providing some relief to high-cost borrowers.
Over time, rate cuts ease the burden on borrowers for everything from home mortgages to credit cards to cars, making it cheaper to get a loan or refinance. Cuts also boost company valuations, helping fuel returns for shareholders.
Federal Reserve Chairman Jerome Powell speaks at the DealBook Summit in New York on December 4, 2024.
Seth Wenig/AP
The Fed is expected to continue cutting interest rates next year, although stubborn inflation of late could slow or halt rate cuts, experts say. previously told ABC News
“Markets expect a gradual rate cut next year, which means inflation remains under control, the labor market is moving at an acceptable pace, stocks are rising and everyone is happy,” said Callie Cox, chief market strategist at Ritholtz Wealth Management. Statement to ABC News.
“The reality is not so cut and dry, however,” added Cox.
Some analysts cited Trump’s policies as a major source of uncertainty for the nation’s economic performance and, in turn, for the stock market.
Trump has vowed to cut taxes on individuals and corporations, which could boost economic growth and boost stock prices, some experts say. However, they added Trump’s proposed rates It could hurt some US producers and retailers who depend on imported raw materials, and trigger a rebound in inflation. As a result, some stocks may suffer.
“The most significant wild card on the table for 2025 will be the potential implementation of tariffs,” David Sekera, Morningstar’s chief U.S. market strategist. he said at the beginning of this month.
Since 1990, 12 years have passed since SThe &P 500 has gained 20% or more, Cox said. The stock market passed this threshold last year, and it is almost certain that it will do so when 2024 ends. It will be difficult for the stock market to achieve this feat for the third year in a row, Cox added.
“If you expect a repeat of 2024, you’re asking a lot of the market gods,” Cox said.
However, the attractive prospect of another rally will pique investor interest as observers watch for early signs of sputtering.
“The opportunities for investors are many, but so are the hurdles,” Shah said.
