Market Review 2024: The Markets Showed Resilience

Key Takeaways

• US stocks extended a bull market, with the S&P 500 gaining 25% in 2024—its second year in a row with gains of more than 20%.
• The Fed lowered interest rates, but the 10-year US Treasury yield moved in the opposite direction.
• Value stocks lagged growth stocks in the US and globally but fared better in non-US markets.

Financial markets showed resilience in 2024, extending the bull market that began in late 2022 as stocks weathered interest-rate changes, uncertainty around the US elections, and the ups and downs of the Magnificent 7 stocks.1 The S&P 500 posted a gain of more than 20% for the second year in a row—the first time that has happened since 1998–99.2 While there were some notable downturns through the year, they were followed by quick recoveries.

Advances in the US and other developed markets led to positive returns globally, as Exhibit 1shows, although emerging markets lagged developed markets. In the fall, the US Federal Reserve cut interest rates by a half point, which preceded two subsequent quarter-point cuts.3 Overall, US bond prices rose for the year, but US Treasury prices were mixed; the benchmark 10-year fell, pushing its yield above 4.5%.

The Fed lowered the federal-funds rate to the 4.25%–4.5% range after three rate cuts totaling a full percentage point in September, November, and December.5 The reductions, which were the first since the COVID-19 pandemic in March 2020, came amid easing inflation and conflicting readings on the job market.6 Inflation remained near multiyear lows, with the November core consumer price index, which excludes more-volatile food and energy items, showing prices rose 3.3% from a year earlier.7

While investors may worry about the impact of interest rate changes, it’s helpful to remember that the market and the Fed don’t necessarily travel in lockstep. In months since 1983 when the Fed has cut or hiked rates, the 10-year Treasury yield has moved in the same direction as the federal-funds rate nearly two-thirds of the time—which means the 10-year moved in the opposite direction around a third of the time (see Exhibit 2). Nor have stocks seemed to take their direction from policymakers at the Federal Reserve. Over that same period, the average US stock market return was similar in months with target rate increases, decreases, and no change.8 It’s a reminder that the market is constantly incorporating new information into prices—including expectations for moves by the Fed.

The US elections concluded with Republicans winning the presidency as well as control of the Senate and House of Representatives. Election outcomes aside, history shows stocks have trended higher regardless of which party is in power in Washington. And while uncertainty about what comes next remains, investors wondering about the postelection world can remember that markets have moved forward even in difficult times like 2020. The message is that, whether you are optimistic or pessimistic about the future, there’s reason for optimism about the market. Market prices continually reset to offer investors positive expected returns.

Gains Around the Globe

Amid this economic and political backdrop, US stocks posted strong returns, with the S&P 500 Index rising 25.0%. Technology companies, including NVIDIA and other artificial-intelligence-related stocks, led the market higher, despite some sell-offs late in the year; the tech-heavy Nasdaq gained 29.6%.9 Helped largely by the US, global stock markets reached multiyear peaks in 2024.10 Equities, as measured by the MSCI All Country World Index, rose 17.5% even as geopolitical tensions remained high, with war continuing in Ukraine and unrest spreading in the Middle East, including the collapse of Syria’s ruling regime in December.11 Developed international stocks lagged the US, with the MSCI World ex USA Index adding just 4.7%. Emerging markets fared slightly better, with the MSCI Emerging Markets Index up 7.5%.12

The bond market was mixed, with US prices rising slightly overall, as measured by the Bloomberg US Aggregate Bond Index, which gained 1.3% in 2024. But the 10-year US Treasury declined for the year, sending its benchmark yield up to 4.58%.13 As the 10-year yield rose above the two-year, the yield curve flattened, as shown in Exhibit 3—another reminder that prices reflect expected events and that yield curves are impacted by more than Fed activity. Global bonds rallied, with the Bloomberg Global Aggregate Bond Index—a broad benchmark of sovereign and corporate debt hedged to the US dollar—up 3.4% for the year.

Eyes on the New Year

As investors look ahead, and as new leaders get to work in many countries around the world, it’s natural to wonder what impact their policies on taxes, spending, and trade may have on markets. And those are just some questions about 2025 that we know about. That’s why investors may be best served planning for what could happen rather than trying to predict what will—by having a diversified portfolio that aligns with one’s risk tolerance, and sticking with it. After all, the market is a reflection of the efforts of companies to solve problems and provide goods and services. In the long run, innovation has succeeded even amid a changing world.

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FOOTNOTES

1. Joe Light, “The Bull Market Has Lasted 2 Years. Is It Just Getting Started?” Barron’s, October 12, 2024. The Magnificent 7 stocks include Alphabet, Amazon, Apple, Meta, Microsoft, NVIDIA, and Tesla. Named securities may be held in accounts managed by Dimensional.
2. S&P data © 2025 S&P Dow Jones Indices LLC, a division of S&P Global. All rights reserved. Indices are not available for direct investment. Their performance does not reflect the expenses associated with the management of an actual portfolio; “Matrix Book 2024: Historical Returns Data—United States,,” Dimensional Fund Advisors, May 2024.
3. Nick Timiraos, “Fed Signals Plan to Slow Rate Cuts, Sending Stocks Lower,” The Wall Street Journal, December 18, 2024.
4. Returns based on the Bloomberg US Aggregate Bond Index and the Bloomberg US Treasury Bond Index. Bloomberg data provided by Bloomberg Finance LP. Source for US Treasuries: US Department of the Treasury. Indices are not available for direct investment. Their performance does not reflect the expenses associated with the management of an actual portfolio.
5. The federal-funds rate is the overnight interest rate at which one depository institution (like a bank) lends to another institution some of its funds that are held at the Federal Reserve.
6. Christopher Rugaber, “Federal Reserve Signals End to Inflation Fight with a Sizable Half-Point Rate Cut,” Associated Press, September 18, 2024.
7. Inflation data as defined by the consumer price index (CPI) from the US Bureau of Labor Statistics; the core CPI is an aggregate of prices paid by urban consumers for a typical basket of goods, excluding food and energy; Megan Leonhardt, “Core Inflation Remains Steady in November,” Barron’s, December 11, 2024.
8. From January 1983 to December 2024, the average monthly return for US stocks, as measured by the Fama/French Total US Market Research Index, was 0.89% when there was a target rate increase, 1.21% when there was a target rate decrease, and 1.02% when there was no target rate change.
9. Felix Richter, “AI-Powered Tech Boom Fuels 2024 Stock Market Rally,” Statista, January 2, 2025.
10. Naomi Rovnick, Dhara Ranasinghe, and Rodrigo Campos, “Markets in 2024: Wall Street’s High-Octane Rally Keeps Investors Captive to the US,” Reuters, December 31, 2024.
11. MSCI data © MSCI 2025, all rights reserved. Indices are not available for direct investment. Their performance does not reflect the expenses associated with the management of an actual portfolio.
12. MSCI data © MSCI 2025, all rights reserved.
13. “Daily Treasury Par Yield Curve Rates,” US Department of the Treasury.‍
14. Past performance is no guarantee of future results. Actual returns may be lower. The Dimensional and Fama/French indices represent academic concepts that may be used in portfolio construction and are not available for direct investment or for use as a benchmark. Index returns are not representative of actual portfolios and do not reflect costs and fees associated with an actual investment. See “Index Descriptions” in the Appendix for descriptions of the Dimensional and Fama/French index data.