As we entered 2024, we anticipated economic normalization and a shift from monetary tightening to easing. We also emphasized the strong fundamentals of the “Magnificent Seven” (today’s dominant seven stocks) and the long-term benefits of Artificial Intelligence (AI). The stock market, particularly the Magnificent Seven and companies associated with AI, had strong positive returns in 2024.
The S&P 500 was up 25% for calendar year 2024. While staying disciplined during market downturns is crucial, maintaining resolve during rising markets is equally important. Media often highlights new market highs as a potential warning, as though markets must return to some previous number. While markets do not move in straight lines, economic growth and improved corporate profits have led to new market highs in every decade.
At the start of each year, analysts predict equity index price targets and usually forecast modest single digit gains. History shows that substantial market movements are more common. Over the past century, annual stock market gains of 10% to 20% were more likely than 0% to 10%. Stocks gained 20% or more almost 40% of the time, according to Deutsche Bank data. Conversely, stocks had negative returns 26% of the time. Modest return years are less frequent, but often feel safer to predict.
Consecutive 20% annual gains are also rare, occurring only four times in the S&P 500’s history. After significant gains in 1935 and 1936, the market plunged in 1937 due to Fed and fiscal policy changes. Things were better after the 20%-plus rallies of 1954 and 1955, with the S&P rising a modest 2.6% in 1956. The more recent trend of gains began in the mid-1990s, with stocks rising 20% or more from 1995 to 1999. Investors that sold out at the end of 1996, after two years of strong equity market returns (34% & 20%), may have missed out on a three year bull market (up 31%, 27%, & 20%) before the 2000-2001 correction arrived.
To read our full market commentary, please click here: CMH Wealth Newsletter 2025
If you have any questions, please feel free to contact us or schedule a conversation.
Disclosure:
This post is not an offer or a solicitation to buy or sell securities. This may not be construed as investment advice and does not give investment recommendations. Any opinion included in this report constitutes the judgment of CMH Wealth Management, LLC as of the date of this report and are subject to change without notice.
Additional information about CMH Wealth Management is also available on the SEC’s website at www.adviserinfo.sec.gov. Past performance is not a guarantee of future results.
