The S&P 500 delivered another solid gain in 2024. The leading index gained 23% in 2024, the second consecutive year of a 20%+ gain.
The last time the S&P 500 gained 20% in two consecutive years? 1997 and 1998 – almost 30 years ago when tech stocks were leading wall street higher. Below is a full list of important stock benchmarks for 2024.
-S&P 500 (SPY): 23%
-NASDAQ 100 (QQQ): 24%
-Dow Jones Industrial Average (DJIA): 13%
-US Mid Caps (IJH): 17%
-US Small Caps (IJR): 6%
-Emerging Markets (EEM): 7%
-Global Stock Market (VT): 17%
Many popular stocks that are widely held by my clients did well in 2024.
Artificial Intelligence (AI) stocks led the way. AI software industry leader Palantir (PLTR) was the #1 performing stock in the S&P 500 in 2024 with a 340% gain. Nvidia (NVDA) was up 190% on the year.
Tesla (TSLA) was down for most of 2024 but a fourth quarter rally boosted shares to a 54% gain on the year.
Crypto was hot in 2024. Bitcoin (IBIT) was up 120% and Etherium (ETHA) was up 40%.
Big tech was strong. Amazon (AMZN) was up 54%,Apple (AAPL) was up 35% and Google (GOOG) was up 41%.
Below is a cool chart on returns by country. US stocks were at the top again – US stocks have outperformed international stocks for the last few years.
link to chart on x
Below is a chart on how commodities performed in 2024.
link to chart on x
The S&P 500 Has Been on a Roll for Two Years
After the 23% gain in 2024, the S&P 500 has been on a roll for the last two years, with a net gain of 48%. Being well invested in the last two years has paid off. Below is a 2-year chart of the S&P 500.
What Should We Expect from the S&P 500 in 2025?
Looking forward into 2025 I am optimistic on stocks – my forecast is for the S&P 500 to gain between 5% and 10% this year. But I expect to see a little more volatility than we did in 2024. I think this is a year where stock investors can pick up some respectable gains but I don’t think it’s a year to be overly aggressive. Below is a list of positive catalysts and also the risks I see for US stocks in 2025.
3 Catalysts for the S&P 500 in 2025
Global and US economies should grow in 2025: The outlook for the global and US economies is solid. The global economy is projected to see good growth in 2025 and the U.S. economy is expected to do the same. Economic growth is typically good for stocks.
Goldman Sachs Predicts Solid Growth in 2025
S&P 500 earnings should hit record high in 2025: S&P 500 earnings hit a series of all-time highs in 2024 and that pattern is set to continue in 2025. The US private sector is healthy and competitive. Revenue is good and margins are strong. That’s a recipe for strong earnings. Strong earnings is the #1 catalyst for higher stock prices.
The S&P 500 is in a bull market: The S&P 500 entered a bull market in October 2022. A bull market happens when the S&P 500 rebounds 20% from a bear market low. Since 1950 the average bull market has lasted 5.5 years and stocks have gained an average of 180%. This current bull market is a little over two years old and the S&P 500 has gained roughly 60%. The path for stocks is never straight higher – but this historical data tells me the S&P 500 has a high probability of more gains in the next few years.
The bull market is 2 years old. Here’s where Wall Street thinks stocks go next
3 Risks for the S&P 500 in 2025
As always there will be risks in 2025 that will cause volatility in stocks and markets.
S&P 500 valuation is high by history: After the strong run in the last two years, despite strong earnings growth, the S&P 500 valuation is high by historical standards. A ‘normal’ P/E (price-to-earnings) ratio would be between 16X-20X. Right now the S&P 500 has a P/E ratio of 30. This isn’t a death sentence for stocks but it signals a little more caution. Take a look at the P/E ratio chart below. You see an anomaly in 2008 because of the ‘great financial crisis’ but other than that all other data is on point.
*chart from macro/micro
First year of new U.S. presidential administration: The U.S. has a new presidential administration taking office in late January. A new administration will always create some uncertainty in the stock market as new policies are implemented.
Third year of a bull market tends to be relatively weak: According to some excellent research from Ryan Detrick of Carson Research, the third year of a bull market tends to be on the weaker side. Here’s the good news. If the bull market makes it past year three, which I expect it to, year 4 and 5 of a bull market tend to be very strong. Take a look at the cool chart below.
*see chart on X
This is My Plan on How to Invest in 2025
With all of this data in mind here is my plan for how I will be investing client funds in 2025.
Growth/Aggressive Investors: 75%-100% stocks, 0%-25% bonds.
Retired/Conservative Investors: 50% stocks, 50% short-term bonds.
2025 also looks like a year to be deploying cash on general weakness in the S&P 500 – also known as – buying dips. I will definitely be looking to buy dips in the S&P 500 in 2025. This is always a good strategy to get a lower cost basis.
I will also be rolling out new investment ideas this year as new opportunities pop up. Be sure to keep an eye on the newsletter.
That’s a wrap for my review of 2024 and outlook for 2025. I hope everyone had a great holiday season and everyone is ready to have a super successful and productive year in 2025.
I’ll be back with another update next week – have a great day!
Disclaimer: This report is for entertainment purposes only. Every investor should consult with an investment advisor before making investment decisions. The Vodicka Group, Inc. is not a broker/dealer. We do not receive compensation for mentioning stocks. At various times, the clients, publishers and employees of Vodicka Group, Inc., may buy or sell the securities discussed for purposes of investment or trading..
