The S&P 500 just wrapped up 2024 with its ugliest year-end slump in over seven decades. Between Christmas and New Year’s Eve, the benchmark index dropped 2.6%, its worst holiday season decline since records began in 1952.
According to Bespoke Investment Group, this drop is only the 12th time the index has fallen more than 1% during this stretch, and data shows it’s the longest streak of year-end losses since 1966.
Jerome Powell’s December 18 statement, signaling a hawkish Federal Reserve stance, sent markets tumbling.
Stocks tumbled, bond yields climbed for the third week in a row, Bitcoin nosedived nearly 15% from its record high, and credit spreads widened. It wasn’t exactly the cheerful end investors were hoping for.
A rough end to a stellar year for stocks
The dismal year-end performance might sting, but 2024 was a banner year for the S&P 500 overall. The index posted a massive 24% gain, surpassing even the loftiest predictions from Wall Street analysts. Those guys spent the year revising their forecasts upward, trying to keep pace with the index’s meteoric rise.
Despite the weak finish, history suggests there’s hope for 2025. Bespoke’s data shows that after similar year-end declines of more than 1%, the S&P 500 has often rebounded the following year. In 11 previous instances, the median gain was around 12%.
That optimism, however, faces serious challenges. Inflation, tariffs, and immigration policies are all wild cards for the new year. Add to that a new particularly unpredictable president in the Oval, and you’ve got a recipe for uncertainty.
But it wasn’t just the U.S. market feeling the pressure. China’s yuan slipped past 7.3 per dollar for the first time since 2023. Analysts see this as a possible move by the People’s Bank of China to stimulate growth by letting the currency weaken.
This comes as Chinese stocks hit their lowest levels since September, and sovereign bond yields plummeted to record lows. The message from Beijing? Economic fundamentals are struggling.
Treasury yields bounce around as traders eye the Fed
US Treasury yields dipped slightly on the last trading day of 2024. As of press time, the 10-year Treasury yield stood at 4.563%, down by a single basis point, while the 2-year yield fell slightly to 4.245%.
These modest movements came during a holiday-shortened trading week, with bond markets closing early Tuesday and remaining shut on Wednesday for New Year’s Day.
Treasuries were anything but predictable in 2024. The 10-year yield started the year below 3.9%, surged to 4.7% in the spring, fell below 3.7%, and ended the year at 4.5%. December added another twist when the Federal Reserve cut interest rates by a quarter percentage point.
The CME FedWatch tool shows that investors now expect the Fed to pause rate changes at its January meeting, with only two rate cuts anticipated later in the year.
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