- The S&P 500 returned 23% in 2024.
- It is the first time since 1998 that it has had two years in a row of 20% plus returns.
- Can the bulls keep charging in 2025?
It is the first time that has happened in 26 years
It has been an historic two-year stretch for the stock market, as the S&P 500 finished the year up 23.3% in 2024. That follows 2023, when the large cap benchmark rose 24.2%.
This two-year bull market marks the first time since 1998 when the S&P 500 has returned more than 20% for the year two years in a row.
The last time was the five-year bull market, which ran from 1995 through 1999. From 1995 through 1998, the S&P 500 finished the year with returns of more than 20%, and in 1999, it finished the year just below that mark at 19.5%.
Can the bulls keep charging in 2025?
Palantir, Vistra and NVIDIA lead the way
The S&P 500 finished 2024 at 5,881.63, so call it 5,882, rounding up. That marks a 23.3% return from 4,770 at the end of 2023 and a 53.2% return from 3,839 at the end of 2022.
The S&P 500 hit an all-time closing high of 6.090 on December 6 after a strong December jobs report that raised hopes for an interest rate cut by the Fed at its December 17-18 meeting. It hit an all-time intraday high of 6,099 on that same day.
However, the S&P 500 limped to the finish line, dropping 2.5% in December.
The top three performers on the S&P 500 in 2024 were cybersecurity stock Palantir (NASDAQ:PLTR), which returned 340%; energy stock Vistra (NYSE:VST), which gained 258%; and AI chip maker NVIDIA (NASDAQ:NVDA), which posted a 171% return.
It is the second straight year that NVIDIA has been a top three performer on the S&P 500. Just for perspective, NVIDIA stock has returned 819% over the past two years, from a stock split adjusted price of $14.61 at the end of 2022, to $134.29 at the end of 2024.
Nasdaq surges 29.8% in 2024
The NASDAQ Composite had the strongest year of the major indexes, as it returned 29.8% in 2024 to end the year at 19,311. That comes after an astounding 42.1% in 2023.
The Nasdaq reached an all-time closing high of 20,174 on December 16, the day before the FOMC met to lower rates. It also recorded an intraday all-time high of 20,204 on the same day. While the Nasdaq fell back from that, it was still up about 0.5% in December.
Over the course of this two-year run for the Nasdaq, it has returned 84.5%, from 10,466 at the end of 2022 to 19,311 at the end of 2024.
The top three performers on the Nasdaq in 2024 were app marketing and technology firm AppLovin (NASDAQ:APP), which gained 712%; software firm and Bitcoin holder MicroStrategy (NASDAQ:MSTR), which was up 358%; and Palantir, up 340%.
The blue-chip Dow Jones Industrial Average also had a solid year, returning 13.3% in 2024, after gaining about 13.7% in 2023. NVIDIA was the top performer on the Dow, after being added to the Dow in the fourth quarter. Retailer Walmart (NYSE:WMT) was second with a 72% return in 2024, while credit card firm American Express (NYSE:AXP) was third returning 58%.
Midcaps beat small-caps
The S&P MidCap 400 returned 12.2% in 2024, while the Russell 2000 benchmark gained 10% last year.
The Russell 2000 small-cap stumbled to the finish line in 2024 after an incredible month of November, when it gained 10.8%. But those gains were almost entirely wiped out in December as the Russell 2000 lost 8.4% in the month to finish the year at 2,230 – up 10% for the year.
It was a similar story for the S&P 400, as it dropped 7.3% in December after gaining 8.6% in November. It finished the year at 3,121, up 12.2%.
Can the bulls keep charging in 2025?
There is a lot of uncertainty heading into 2025, as the markets are coming off a bad month of December. Further, the valuations of the Nasdaq and S&P 500 are as high as they have been since 2021 – both sitting above 30. This is a warning sign for investors to watch valuations as some overpriced stocks could be due for a correction.
There is also the uncertainty around the new administration, which could be a boon for some sectors and businesses related to potential deregulation. On the other hand, potential policy shifts could have an impact as well. Also, inflation has crept back up, and the Fed has set its sights lower for the number of rate cuts in 2025 and 2026
It is probably why market experts are conservative in their projections for 2025. Most major Wall Street banks predict the S&P 500 to finish the year at around 6,500, which would be a solid 10% gain. The range falls between 6,400 on the low end to 7,000 on the high end.
Of course, most were projecting high-single-digit returns in 2024, and we all know how that turned out.