Stocks Down in Holiday-Shortened Week; Bonds Gain Modestly

Good morning, and Happy New Year, and Happy Winter Wonderland!  I hope everyone and their families had a wonderful holiday season, and now it’s back to reality - full work weeks, schools are open again, etc.  In college, we referred to this period as the “dark ages” because we started school on Jan 2 and didn’t get a single day off (no holidays) for 9 weeks, while we had to endure the short daylight hours and cold, gloomy days.  Hence the term “dark ages”.

In a holiday-interrupted week, the Dow (-0.6%), NASDAQ (-0.5%), and S&P 500 (-0.5%) closed down, but all the losses were in the first two days and attributed to 2024, while the last two days brought small gains attributable to 2025.  The S&P 500’s 25% total return for 2024 marked the second year in a row that the index generated a gain of more than 20%—the strongest back-to-back annual results since 1997/1998. However, last year’s rally was narrow, as just seven technology-oriented stocks accounted for more than 53% of the index’s overall return, according to S&P Dow Jones Indices. 

Meanwhile, taxable bonds gained 0.2% and tax-free municipal bonds gained 0.6% last week.  The 10-year Treasury yield slipped 0.02% to finish the week at 4.60%.  The U.S. bond market produced a moderately positive return (1.1%) overall for 2024, but it came with plenty of volatility due to shifts in the outlook for inflation and monetary policy. The yield of the 10-year U.S. Treasury note reached as high as 4.73% in April before falling as low as 3.61% in September.  It finished 2024 at 4.57% versus 3.88% at the end of 2023.  Thus, given the rise in interest rates in 2024, it is surprising that bonds actually finished positive for the year.

Due in great part to the holiday, economic news was scarce, as was trading volume on Wall Street.  Initial jobless claims fell, as well as its 4-week moving average, suggesting that the labor market continues to remain strong.  The ISM Manufacturing report also showed gains in manufacturing in December, but the prices paid component rose, giving more inflationary concerns.  These data had little to do with market movements, as the next several weeks will drive the markets, as we head into corporate earnings season, and a change in White House administration.

For those of you who may be interested, we will be airing podcast / YouTube videos each of the next two Wednesdays on New Year Financial Fitness Tips, and those episodes will be followed by our 2025 Economic and Market Outlook.  Have a great day and terrific week!

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