
Insights

January 7, 2025
Happy New Year! We are excited to begin the year by sending you our inaugural edition of our monthly newsletter! It is our hope to provide you with timely updates on the market as well as important reminders and helpful information on a variety of relevant topics. We genuinely look forward to your feedback and hope you find these emails useful. Please utilize the “Share your thoughts” button below to share any thoughts, questions or suggestions that you may have.
Market Highlights
2024 was the second consecutive year that the market (using the S&P 500 as a proxy) was up more than 20%, a rarity. The year saw the Federal Reserve continue their fight with Inflation, which began at 3.35% (Consumer Price Index) and ended the year at 2.75%, allowing the Fed to cut their target rate from around 5.5% to around 4.5%. This pushed the Treasury Yield Curve lower across the shorter-term maturities, but longer term maturities actually moved up as the market expectations for longer term inflation increased.

The positive news on inflation and rates coupled with continued building of artificial intelligence infrastructure spending helped to power the S&P 500 up 1,112 points or 23.3% to a level of 5,882 and was up 25% including dividends. The Dow Jones Industrial Average was up 4,855 points or 12.9% to 42,544. This is the seventh year the S&P 500 has been up in the past decade.

Of the asset classes we follow, the best performing one for the year was Growth Stocks (Russell 3000 Growth) with a 31.6% return. The worst performing was Commodities (Bloomberg Commodity Index) with a 0.1% return.

S&P groups similar companies into 11 sectors; 10 of those sectors were up in 2024, four of them were up by more than 25%.
The best performing sector was Communication Services with a 38.9% return. The biggest contributor to this outperformance was Meta Platforms Inc, which is the second largest stock in the sector and had a return of 65.4%.

The second best performing sector was Information Technology with a 35.7% return. The biggest contributor to this outperformance was NVIDIA Corp, the third largest stock in the sector, with a return of 171.2%.
Meanwhile, Materials posted the worst return at -1.8%. The biggest contributor to this underperformance was Nucor Corp, which is the seventh largest stock in the sector and had a return of -32.9%.
More broadly, more than 2/3 of stocks that are in the S&P 500, underperformed the index’s return. This is due to the index being market cap weighted, so when the biggest stocks are outperforming, the index will do better than the average stock.

Looking Ahead
While the economy has been doing well and company earnings are up, they have not increased at the same rate as stock prices after back-to-back returns in excess of 20%. The S&P 500 Price-to-Earning Ratio started the year at 25 and ended the year at 28. The dividend yield went from 1.5% to 1.3%. However, valuation has never been a good timing tool and markets can remain expensive for extended periods of time, but we will be watching closely.
Important Reminders
If you are making contributions to retirement accounts, some of the contribution limits have increased for 2025. Elective deferrals for 401(k), 403(b) and 457 accounts have a new contribution limit of $23,500 (there are additional catch-up contributions if eligible). Contribution limits for Defined Contribution Plans increased to $70,000. The Simple IRA contribution limit is now $16,500 (plus an additional catch-up contribution if eligible). SEP IRA contributions are limited to 25% of net earnings (if self-employed) with a new contribution limit of $70,000. The contribution limits for Traditional IRAs and Roth IRAs remain at $7,000 with a $1,000 catch up for those who are 50 years old or older. Please note some of these limits are subject to phaseouts based on your adjusted gross income.
If you turn 73 this year, you are now subject to Required Minimum Distributions (RMDs) from your various pre-tax IRA accounts and may also be required to take RMDs from your 403(b), 401(k) and 457 accounts. If you turn 73 this year, you can delay your first RMD until April 1st of 2026, however there may be reasons not to delay. We encourage you to call us to discuss your options and consult your tax professional as needed. If you’d like, we can set your RMDs to be taken periodically, monthly, or annually every year.
Thoughts from The Team
The start of a new year is a wonderful opportunity to review your financial goals, account beneficiaries and estate planning documents. If there have been any changes to your financial situation or if you need to update any information on your accounts, please let us know as soon as possible.
We look forward to another year of servicing our wonderful clients and hope 2025 is a happy, healthy and prosperous year.
Be Well,

Disclaimers
The information contained herein, including summary/prices/quotes/statistics have been obtained from sources we believe to be reliable but we do not guarantee its accuracy or completeness. Any comparison to a benchmark is for comparative purposes only and actual account composition may differ. Investments cannot be made directly into an index. Past performance is not indicative of future results. Past results are not indicative of future returns.
Would you like to begin receiving our Newsletter? Subsribe below!
Newsletter Achive