US stock markets closed out 2024 on a high note, with the S&P 500, Dow Jones, and Nasdaq indices hovering near record highs. This continued a two-year bull run fueled by economic resilience, artificial intelligence (AI) advancements, and Federal Reserve rate cuts.
The Federal Reserve’s decision to slash interest rates by nearly 100 basis points during the year provided a significant boost to equities. At the same time, a surge in technology stocks, driven by optimism over AI-powered corporate profits, propelled the market to new heights.
The S&P 500’s technology, communication services, and consumer discretionary sectors soared by more than 30% in 2024. AI giant Nvidia, though posting a smaller gain compared to last year, surged nearly 170%, helping it achieve a market valuation of $3 trillion. Similarly, Tesla reclaimed its $1 trillion market cap after a 2024 rally.
As of early Tuesday trading, Dow E-minis rose 0.21%, S&P 500 E-minis gained 0.29%, and Nasdaq 100 E-minis increased 0.36%. Nvidia shares climbed 0.7%, while Tesla saw a 1.6% uptick in premarket trading.
“It’s also normal to start thinking that the AI rally will one day fizzle out…but still, all those who called for a correction have so far happened to be wrong, and Wall Street analysts spent the year rising their price targets,” remarked Ipek Ozkardeskaya, senior analyst at Swissquote Bank.
Trump’s Victory Sparks Market Optimism
The re-election of Donald Trump as US President spurred further market gains. His promises of deregulation, tax cuts, and tariff hikes to support domestic businesses buoyed investor confidence. Small-cap stocks rallied, with the Russell 2000 index hitting a record high, marking a 10% annual gain. Banks also posted impressive performances, with the sector rising more than 30% this year.
Trump’s victory also proved advantageous for cryptocurrency markets, as bitcoin prices surged to $100,000. MicroStrategy, a leading corporate investor in bitcoin, saw its shares triple in value this year, rising an additional 3.3% on Tuesday. Other crypto-related stocks, such as Coinbase and MARA Holdings, also posted gains of 1% and 0.6%, respectively.
Market Challenges Amid the Optimism
Despite the overall positive trend, December presented challenges for equities. The S&P 500 faced its largest monthly decline since April due to higher Treasury yields and stretched equity valuations. The benchmark 10-year note yield stood at 4.5%, reflecting concerns that Trump’s policies could stoke inflation, potentially slowing the pace of future rate cuts by the Federal Reserve.
Looking ahead, traders anticipate the Fed’s first rate cut of 2025 to occur in either March or May, as indicated by the CME Group’s FedWatch Tool.
Meanwhile, other sectors experienced losses in 2024, with materials stocks declining more than 2% amid economic uncertainties in China, the world’s largest consumer of metals.
As 2024 concluded, Wall Street remained cautiously optimistic, balancing the momentum of AI-driven growth and monetary easing with the challenges of inflation and global economic uncertainties.
