2024 | December 23

The Markets

Stocks Down

Stocks took a volatile turn, as the major U.S. indexes fell around 2% overall in a week punctuated by a sharp decline on Wednesday. However, a partial recovery rally on Friday offset much of the earlier drop.

The major U.S. stock indexes fell around 3% to 4% and bond yields surged after the U.S. Federal Reserve on Wednesday afternoon indicated that it’s likely to cut interest rates less than previously expected in 2025. The Fed approved a widely anticipated quarter-point rate cut, but its forecast for two further cuts next year marked a retreat from earlier expectations for about four. 

For the second week in a row, bond prices tumbled, pushing yields higher. The yield of the 10-year U.S. Treasury note climbed to its highest level in nearly seven months, reaching as high as 4.59% on Thursday before retreating to around 4.53% at Friday’s close. That was up from 4.15% two weeks earlier and a recent low of 3.62% on September 16.

An index that tracks investors’ expectations of short-term U.S. stock market volatility surged about 74% on Wednesday, with nearly all the increase coming after the U.S. Federal Reserve concluded its policy meeting in the afternoon. The CBOE Volatility Index (VIX) closed Wednesday’s session at 27.7, up from 15.9 the previous day. By Friday’s close, it had settled down to 18.4.

The U.S. economy’s third-quarter growth was stronger than initially estimated, as the government reported on Thursday that GDP grew at an annual rate of 3.1%. That was up from an earlier estimate of 2.8% and the second quarter’s 3.0% growth. GDP growth has now topped 2.0% in eight of the last nine quarters.

The value of the U.S. dollar surged relative to other currencies after the U.S. Federal Reserve on Wednesday embraced a more hawkish outlook for further rate cuts. Relative to other major currencies, the dollar rose more than 1% to its highest level since November 2022. 

The last days of 2024 will be light in terms of economic reports. However, a report on consumer confidence will be issued on Monday, followed by Tuesday releases on new home sales and durable goods. Looking further ahead into the following week, watch for reports on pending home sales on Monday, December 30, and home prices on Tuesday, December 31. 

Source: John Hancock Investment Management

Merry Christmas!

Which Country Had the Best Economy in 2024

Despite high interest rates, stubborn inflation, and wars in Ukraine and the Middle East, there was no stopping the global economy in 2024. In October, the International Monetary Fund forecasted the world economy will grow by 3.2 percent in 2024 with the world’s developed economies growing by 1.8 percent and emerging and developing economies growing by 4.2 percent. The United States was projected to grow by 2.8 percent over the same period.

While the U.S. economy is growing faster than many advanced economies, the United States did not have the best economy in 2024, according to analysis from The Economist. The newspaper reviewed economic and financial indicators, including:

• Gross domestic product, or GDP, which is the value of all goods and services produced by a country,
• Stock market performance,
• Core inflation,
• Unemployment, and
• Government deficits, which is the difference between what a government receives and what it spends.

When the analysis of 37 nations was complete, The Economist determined that Spain had the “best” economy for 2024.

“While Europe’s other large economies are plunged in gloom, Spain’s is soaring. It is set to grow 3 [percent] this year…almost four times the euro-area average. Hit harder than most by the pandemic, it now boasts 1.8 [million] more jobs than at the end of 2019. Investors have noticed: with faster growth and a lower fiscal deficit than France, Spain has seen its bond yields dip below those of its northern neighbor for the first time since 2007,” reported The Economist.

Ireland, Denmark, Greece, and Italy rounded out the top five. The United States landed in 20^th position. The U.S. had higher inflation than most of the top five, a slightly higher unemployment rate, and a much higher deficit, which offset solid economic growth and extraordinary share price gains. Three of the top five economies had budget surpluses last year.

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