(Justin Vaughn, Editor, Options Trading Report)
Stocks soared in 2024…with the indexes marching to record yearly highs. The S&P 500 finished up 24% (with “57 record closes”), with the Dow Jones Industrial Average gaining 14%. The heavy-tech Nasdaq Composite soared a dazzling 31%, reflecting its powerful make-up of the Magnificent 7, chip and AI stocks as the exchange, after a few hiccups, continued moving upward. The Russell 2000 (the forgotten index, made up of smaller cap value stocks) has struggled for several years (since 2021), as its sister indexes have soared. Many money managers are predicting an infusion of capital into its value stocks and speculated that the index is ready to see more activity in the coming year as its make-up of securities will finally be considered in 2025. The economy flourished in 2024; with the GDP (Gross Domestic Product) the CPI (Consumer Price Index), both reflecting strong indicators of a growing economy. Inflation proved sticky but beatable as Mr. Powell’s 2% target is nearing after several rate cuts. All pieces of the economic puzzle, for the second year in a row glided together as the indexes provided. Gold has increased and stayed consistently stronger all year, rising to a high of over $2,800.00, as investors turned to the glittering metal for stability and a haven of ‘safety.’ Presently at $2.639.30, it is up over 20% this year. Bitcoin has grown in popularity with President-elect Trump proclaiming support for trading platforms and ease of involvement. Bitcoin has moved upward steadily since Trump was elected, as investors have flocked to the commodity. It reached a record price of $108,000 recently, settling back now to the $94,00 range. With easier access and more availability to purchase cryptocurrencies, investors and traders will use this commodity to transact financial business. “With the economy doing well, with the Fed cutting interest rates, with continued investment in infrastructure and the economy, we see scope for other sectors to play some catch-up with tech,” said Holly MacDonald, chief investment officer at Bessemer Trust.
The Housing market, stalled by high mortgage rates, high retail prices and a stubborn inventory (sellers unwilling to negotiate price, asking higher-than- comparable selling prices) has slowed. The current mortgage of 6.87%, down from over 7%, has dropped, however not enough to lure buyers back in the marketplace. “We think it’s going to continue a slow climb out,” said Danielle Hale, chief economist at Realtor.com., adding, “We expect home sales to rise 1.5% in 2025.” Many realtors have suggested sales would rise if rates dropped down to the 5.5% range, according to the NAR (National Association of Realtors).
Heavy-techs, chips and AI stocks lost steam Friday going into another shortened work week as the market could not generate any kind of a rally. Big techs, led by the magnificent 7 stalwarts were ‘dead-in-the-water,’ all losing value. Across the board, stocks faltered as the Dow Jones Industrial Average dropped 334 points, off 0.8%. Both the S&P 500 and the Nasdaq Composite gave up 1.1% and 1.5% respectively. Even as numbers were negative Friday, the week was positive for the indexes. The benchmark 10-year Treasury hovered steady at 4.619%, a near peak. Inflation is still the number one concern as efforts to slow it have taken longer than anticipated. Jobless benefits have risen as workers on the jobless roll are at the highest level since 2018. Crude oil has remained near $71.00 a barrel with pump prices below $3.00 a gallon. Santa has a few days left in his visit-hopefully the market will celebrate!
RUMBLINGS ON THE STREET
Joanne W. Hsu, director of the University of Michigan Consumer Sentiment Survey and chief economist, WSJ – “Consumer sentiment has been climbing in recent months, but the gains have been uneven.” according to the U of M monthly survey. “Those in lower income and some in middle-income brackets just don’t feel like they are thriving,” said Joanne W. Hsu. “Even though, in other parts of the survey, there are signs of strength.”
Karoline Leavitt, Trump spokeswoman, WSJ – “Unlike the sitting president, Joe Biden, President elect Trump believes his utmost priority is the safety and security of American citizens, and he will, in fact, take the necessary actions to uphold this responsibility.”
Mike Johnson, House Speaker, (R.,La) – “We know how to work with a small majority; that’s our custom now. We’ve got to all row in the same direction.”
Mark Mallek, chief investment officer at broker dealer Sisbert, WSJ – “The bond market is concerned about inflation and the growing deficit and is sending a message to the incoming administration to be thoughtful about its policies.”