Welcome to the monthly market update from Midland Wealth Management. I am Dan Zeigler, Senior Portfolio Manager. Today, I wanted to take a few minutes to give you an update on the markets for the month of December and for 2024.

Market Overview

For December, the S&P 500 Index gave up some gains as the index was down 2.37%. Despite this, the index closed out an extraordinary year, rising 23.3% for 2024, adding to the 26% return in 2023 – which is the best two-year performance since 1998. A rising demand for artificial intelligence, benefiting major technology companies like Nvidia and Meta, a resilient U.S. economy, and the Federal Reserve’s interest rate cuts help propel the S&P 500 to record highs in 2024.

Small-cap stocks were up 11.39% for the year, and developed international gained a modest 3.51%.

Corporate Earnings

As of December 31^st, the S&P 500’s forward price-to-earnings (P/E) ratio stands around 21.5, indicating that investors are paying $21.50 for every dollar of expected earnings over the next 12 months. This metric is above historical averages as this premium reflects investor confidence in sustained earnings growth and favorable economic conditions. However, the market may be more susceptible to volatility if earnings fail to meet expectations. Analysts are projecting that earnings grow by 14% in 2025.

Jobs Market

The U.S. labor market demonstrated resilience with a notable rebound in employment numbers. The economy added 227,000 jobs in November, surpassing economists’ projections of 200,000 to 215,000. October’s jobs number was also revised higher by 36,000 jobs. The unemployment rate edged up to 4.2% from 4.1%.

Federal Reserve & Bond Market

On December 18^th, the Federal Reserve reduced the federal funds target rate by 0.25% to a range of 4.25%–4.50%, marking the third rate cut of 2024. The Fed has now lowered rates by a total of 1% this year as it seeks to balance economic growth with inflation control. Projections suggest a more gradual approach to rate adjustments in 2025, with expectations of two additional rate cuts, down from the four initially anticipated—a reflection of ongoing concerns about persistent inflation.

The 10-year U.S. Treasury yield rose from approximately 4.20% to 4.58% by December 31, 2024. Concerns over potential inflationary policies under the new administration contributed to the increase in yields. Rising rates have also pushed mortgage rates to their highest levels since July 2024, with the 30-year mortgage rate now around 6.90%, up from 6.62% a year ago.

Outlook

Looking ahead, investors will remain attentive to labor market data, Federal Reserve policy shifts, fourth quarter corporate earnings, and policy changes under President-elect Trump.

Thanks for joining me for this month’s market update.