My Opinions About 2024’s Stock Market Performance

The suggestions and illustrations in this blog are not intended as financial advice. They are my personal opinions.

In the short term, many factors will affect stock prices – sometimes all at once and sometimes just one or two factors, depending on the current issues of concern.

The following list includes some of the factors that may affect stock prices and the values of the companies represented. These factors are listed alphabetically since the degree of importance changes – as do the winds and the moods of investors.

For a long-term view, you need to consider whether the American economy will strengthen and grow, and whether this growth will be reflected in the value of a well-diversified stock portfolio.

I define a long-term investor as someone investing to attain a specific goal or assure their long-term financial security, and who does not plan on selling their stocks within the next ten years. If you do not plan on holding your investment portfolio for at least ten years (or minimally seven years), then I advise you not to invest in the stock market. This doesn’t mean that you shouldn’t make changes as circumstances evolve, but you should factor in possible changes before you make your investment commitment.

For the short-term view, there are too many things to consider, occurring daily or even on a moment-by-moment timetable. If you invest using a short-term view and are not a professional trader, you have picked up an extremely time-consuming, nerve-wracking and possibly expensive hobby!

For the long-term investor, all you need to consider is how you think things will be in ten years. If you think American companies will be stronger, more profitable and bigger, then invest. If not, then do not invest. This is a much more serious decision but has much fewer moving parts, and you do not need to devote serious daily time to watching dozens of factors and continuous price changes.

My focus and concern is assisting clients with securing their long-term financial security. This is a long-term strategy. I do not help clients with stock trading, nor do I write about trading, so those only interested in trading should skip my blogs or speech presentations.

Discussing last year’s performance is interesting but not a call to action. At some point, short-term changes occur in corrective cycles and cancel themselves out, with one exception. That exception is a tendency toward a long-term upward or downward trend with that trend arising over a ten-year or so period. Occasionally, there will be major game changes such as COVID-19, the 9/11/2001 attack, a worldwide recession or a period of runaway inflation. These are devastating and cause precipitous drops in the stock market, but they are reactions to a terrible event that somehow becomes something we live with. Over time, there is a correction, a solution or a realization that the end is not here, and the markets revert to the trend line they were on. During that period, we feel crummy, despondent, angry and fearful. In some manner, our investing inclinations may become frozen, and we are gripped by inaction.

When your investment focus is based on long-term goals and your portfolio has been developed to provide a reasonable chance of achieving those goals, the daily market machinations are meaningless or should be meaningless. Now, let’s take a look at last year.

2024 was a good year for the stock market. The four major indexes were up. The NASDAQ Composite led the group with a change of better than 28%, followed by the S&P 500 with a 23% increase, then the Dow Jones Industrial Average (DJIA) at 13%, and the Russell 2000 with a 10% increase. The NASDAQ is tech-heavy and that sector had a great year. Many of the largest NASDAQ companies are also in the S&P 500 index, pushing that index up significantly. Far behind were the DJIA and Russell 2000. The DJIA has a higher proportion of industrial and basic industries, which did reasonably well but lacked the excitement and potential of AI-driven tech companies. I believe DJIA investors are more conservative and will be satisfied with smaller gains to avoid large losses in a market downturn while receiving higher dividend payments. While my top three indexes comprise large-cap companies, the Russell 2000 is a small-cap index and seems to be lagging over the past year and ten years. The Russell 2000 provides an element of diversification to the portfolio since not all companies are large-cap, but its performance is disappointing compared to the larger-cap indexes.

A note about the larger indexes. The DJIA companies pay about half of their earnings as dividends, while the S&P 500 companies pay about 30%. The DJIA payout percentage has risen during the last ten years while the S&P 500 has dropped. Also, the price-to-earnings (PE) ratio for the DJIA has increased to exceed the S&P 500 PE ratio. That is somewhat surprising since the S&P is heavier with tech companies with higher PE ratios, meaning the balance of S&P 500 companies has much lower PE ratios. I could write a small book analyzing these metrics but will restrict myself to a few overall conclusions.

A higher PE ratio makes a company’s stock and a fund containing those stocks riskier. The PE ratio determines the share price and reflects an optimism that earnings will rise. I am not so sure about this for the totality of the DJIA companies. I did not analyze each company separately, but I posted a chart in a previous blog listing the 30 companies in DJIA index, and most do not appear to be expecting big bump-ups in earnings. Further, the higher dividend payout compared to the S&P 500 seems to indicate that not as many earnings are being retained to provide for infrastructure growth, debt paydown or future dividend growth. The S&P 500 numbers in this regard indicate the opposite, which is a better outlook for those companies. I recognize these numbers will self-correct going forward, but my chart for the last ten years does not show a good trend for the DJIA. More time would be needed to analyze the underlying data. Please refer to my recent blog posts, which include charts with the top ten companies in each fund and the sector breakdown.

The current stock market is near its all-time high, and this was accomplished in the past year when interest rates rose to their highest levels in a couple of decades. Since it is assumed the stock market – as a financial asset – competes with all other financial assets, the market rising at the same time interest rates rose is a paradox. Yet, this trend can be explained by:

Those buying stocks anticipate growing profits. Long-term interest rate growth reflects an expectation by borrowers that profits from their capital expenditures will exceed the higher interest costs, which is a reflection of optimism. The Federal Reserve controls short-term interest rates and has lessened its grip with some rate reductions. This indicates an anticipated decrease in inflation. How things play out in 2025 remains to be seen.

It is clear that we are dealing with complicated issues with many moving parts. We can only do the best we can with what we know. Trading stocks for short-term profits is almost impossible. Long-term investing to secure eventual financial security based on definite goals to construct a stable portfolio is a calmer activity with a reasonable chance of success.

I will present more of my views and analysis on Zoom on Thursday, February 20, 2025, for the East Brunswick Public Library. This hour-long presentation will be chock full of information, and I will prepare a 100-page handout with over 30 charts that I will explain. Register for this free program here: If you cannot attend the Zoom program but want the handout, send me a request at [email protected] and write Stock Market Handout as the subject. No messages are necessary. I will email the handouts next week.