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• Economy – Growth remains strong, with some worry over another wave of inflation

• • • Year/year GDP estimates for Q3 2024 have shown that the U.S. economy has remained firmly on a growth trajectory.
    • Strong consumer spending and corporate profits, coupled with fiscal deficits have provided tailwinds for the economy that look poised to continue for the foreseeable future.
    • Goods inflation has cooled but services inflation has remained stubborn.
      • The Federal Reserve cut their benchmark rate twice during the quarter. Chairman Powell cautioned markets during his December remarks that further cuts were not preordained and would depend on incoming data.

• Equity – U.S. stocks continue momentum and post another strong year

• • • The S&P 500 gained +2.41% in Q4 to finish the year up +25.02%. 2024 marked the second year in a row of gains north of +20% for U.S. Large Caps.
    • U.S. Mid Cap and Small Cap stocks eked out small gains for the quarter after pulling back in December. Each posted respectable gains for the full year with the Russell Mid Cap Index up +15.34% and the small cap Russell 2000 Index rising +11.54%.
    • International and Emerging Markets equities struggled in Q4, with the MSCI EAFE Index falling -8.11% and the MSCI EM Index falling -8.01% during the quarter.

• Fixed Income – Bonds pull back as expectations shift towards higher for longer interest rates

• • • The 10-year Treasury yield rose from below 4.00% to near 4.60% during the quarter, which pushed the Bloomberg U.S. Aggregate Index to a -3.06% return in Q4.
      • Yields adjusted to the possibilities for a pickup in inflation, higher economic growth, and/or worries over expanding deficits.

• Risks/Other Considerations

• • A second Trump term has renewed worries over tariffs and possible trade wars. Markets seem to be expecting less severe tariff policies than what was promised on the campaign trail but expect continued posturing.
  • Valuations remain stretched relative to history for U.S. stocks and corporate bonds. Valuations can always remain elevated or stretch further and are not good predictors of short-term performance.