The stock market experienced a significant increase in 2024, driven by the performance of major tech companies.
Large-cap growth funds achieved a gain of 30%, while the S&P 500 recorded a gain of 23.31% (25.02% with dividends). This marks the second consecutive year of over 20% gains, resulting in a two-year return of 53.19% (57.88% with dividends).
Despite challenges such as rising Treasury yields and a cautious Federal Reserve, the market has shown resilience. The Federal Reserve's rate cut expectations have caused uncertainty for investors, as they have revised their forecast from four quarter-point cuts to two, reflecting the strength of the U.S. economy.
Market analysts remain optimistic, highlighting the strong performance of stocks over the past two years. However, the dominance of a few tech stocks has raised concerns about the broader market's health, as many funds have struggled to keep up with the S&P 500's performance.
The top seven tech companies, including Nvidia, Apple, Microsoft, Tesla, Meta, Amazon, and Alphabet, have accounted for over half of the S&P 500's total return. This concentration has left diversified mutual funds lagging behind.
Large-cap growth funds have outperformed their value counterparts, while small-cap and midcap value funds have posted lower returns compared to growth funds. Utilities have emerged as unexpected high performers, driven by AI-driven energy demand.
Traditional asset classes such as international stocks and bond markets have underperformed, raising questions about the effectiveness of diversification strategies. As the market evolves, investors are advised to reassess their portfolios and make strategic investment choices.