As 2024 comes to a close, the US stock market enters the final month with a strong performance. By the end of November, the three major indices saw the Dow Jones rise by 19.2%, the S&P 500 increase by 26.5%, and the Nasdaq achieve nearly a 30% gain.

Looking back at 2024, which is about to pass, gold and Bitcoin surged at the beginning of the year, AI continued to lead trends, followed by the recession panic in early August and the highly anticipated US election in November. Bonds and the US dollar fluctuated with changing economic expectations.

Despite fluctuations in the market, it still provided substantial returns for investors. Especially since Trump's victory, the S&P 500 has surged past the 6000-point mark, and the market generally expects a strong close this year.

The S&P 500 rose by 24% in 2023, and if it can maintain a growth of over 20% by the end of this year, it will set a record for the highest consecutive gains this century.

This phenomenon is very rare in the century-long history of the US stock market, first appearing a century ago during "The Roaring Twenties," when the US economy entered a phase of rapid growth and the stock market experienced long-term prosperity.

The last occurrence was at the end of the last century; the S&P 500 saw four consecutive years of over 20% gains starting in 1995, achieving a 19% rise in 1999. However, after several years of climbing, the market faced the Great Depression and the burst of the Internet bubble.

As the season changes, how might next year's market perform, and will it be able to maintain its past excellent performance? Let's dive into this week's "Opportunity Dispatch."

A century of cycles.

UBS Group stated that since 2020, the world has experienced pandemic lockdowns, two large-scale conflicts in Eastern Europe and the Middle East, and inflation and interest rates have seen the largest increases in decades.

During this period, the nominal GDP of the USA grew by more than 30%, corporate profits increased by 70%, and ChatGPT led the AI wave, bringing significant returns to investors in the Capital Markets.

The Institutions believe that with high economic growth, strong market returns, and improvements in productivity, the market is beginning to describe this generation as the 'Roaring Twenties' again. The market boom is expected to continue through 2025, and in an optimistic scenario, the S&P 500 could rise to 7000 points.

Goldman Sachs Research Department stated that the economic situation in the USA is good: concerns about recession have faded, inflation is still in the process of falling back to the 2% target, and the labor market remains strong. Consumer spending continues to be a core pillar of economic growth, thanks to the real income growth driven by the hot labor market and the wealth effect brought by market prosperity.

Data shows that in the first three quarters of 2024, Consumer spending accounted for as much as 78% of the USA GDP. Inflation-adjusted consumer spending grew by 3.0% year-on-year in the third quarter, surpassing 2.7% in the second quarter, driven by strong growth in real after-tax income.

The content of this chart is for reference only and does not constitute any investment advice.

Policy fog.

Trump's impending return to the White House and the Republican's Red Sweep in Congress may lead to significant policy changes, which could impact economic and market performance. Although specific details are yet to emerge, major policy contexts such as tax cuts, increased tariffs, relaxed Industry regulations, and tightened immigration are still to be expected.

Goldman Sachs believes that the new president's choice to simultaneously increase trade tariffs and reduce domestic taxes will roughly offset the impact on the S&P 500's EPS. Due to strong economic conditions, EPS is expected to continue to rise in the coming years.

The content of this chart is for reference only and does not constitute any investment advice.

The Institutions stated that although the expected policy changes could be significant, they would not markedly alter the trajectory of the economy or monetary policy. Analysts forecast that by the end of 2025, the core PCE data, excluding the impact of tariffs, will decrease to 2.1%, while tariffs may push this Indicator up to 2.4%.

Fidelity believes that the most likely scenario for the USA economy in 2025 is Reflation. Current strong consumer spending, a solid personal sector balance sheet, and a resilient labor market increase the likelihood that inflation will rise significantly starting in the second quarter due to the reforms proposed by the new government.

Both the Soft Landing and Stagflation scenarios have a 20% chance of occurring, while the possibility of recession is only 10%.

The content of this chart is for reference only and does not constitute any investment advice.

Inclusive rise?

Most Institutions in the market are optimistic about the performance of US stocks next year. Fidelity stated that recent trends are expected to continue, and there is also anticipation for new growth directions in the market, which is exciting for stock investors.

In 2024, the earnings growth of the S&P 500 Index is still mainly driven by large Technology stocks represented by the Magnificent Seven of the USA stock market. In 2023, the Magnificent Seven contributed 63% of the returns of the S&P 500 Index. As of November 2024, they continue to contribute nearly half of the index's returns.

JPMorgan expects that the earnings growth of the Magnificent Seven will slow down to 20% in 2025, which is still a robust growth rate, but the earnings growth of other companies will accelerate significantly. AI will continue to be a focus in the market, but the market will be more balanced.

This is also called an Inclusive Rally. It is used to describe the phenomenon where the majority of stocks or market sectors rise together, rather than being driven only by a few large stocks or a specific sector. This trend is usually seen as a sign of market health, indicating broad participation and overall upward momentum.

The Institutions stated that deregulation and corporate tax cuts may give investors the confidence to Buy previously unloved market areas, such as value stocks and small to mid-cap stocks, which also benefit from earnings recovery and attractive valuations. In terms of industry segments, the profitability of Industrial, Energy, and CAILIAOHANGYE has been relatively sluggish in recent years, but in the future, consumers and businesses should restore capital-intensive spending.

The content of this chart is for reference only and does not constitute any investment advice. Past performance is not indicative of future results, and the market carries risks, so investment needs to be cautious.

If you remain Bullish on the Large Cap rise, investing in Index ETF may be an option. Currently, large ETFs tracking the S&P 500 Index include $Vanguard S&P 500 ETF(VOO.US)$、$SPDR S&P 500 ETF(SPY.US)$ , which all have good liquidity and low fees. VOO has exceeded 1 trillion dollars, while SPY has also surpassed 600 billion dollars.

Additionally, the value stocks and small- to mid-cap stocks that JPMorgan is optimistic about also have corresponding ETFs available for selection, with larger scale options. $Vanguard Value ETF(VTV.US)$and $iShares Russell 2000 ETF(IWM.US)$ 。

Related risks.

Inflation exceeds expectations: If the last mile of de-inflation is not achieved in a timely manner, it may force the Federal Reserve to pause the interest rate cut process or even turn to rate hikes, affecting market performance.

High valuations: The PE ratio of the S&P 500 Index has increased by a quarter over the past two years. As of November 2024, the PE ratio of the S&P 500 Index is positioned at the 93rd percentile historically, indicating a high level. If earnings growth falls short of expectations, it may trigger a market correction.

Geopolitical risks: Escalation in trade disputes or regional conflicts may affect economic performance and investor confidence.

Risk disclosure: This content does not constitute a research report, is for reference only, and should not be used as a basis for any investment decisions. The information involved in this article is not a comprehensive description of the securities, markets, or developments described. Although the source of the information is considered reliable, the accuracy or completeness of the above content is not guaranteed. In addition, the accuracy of any statements, opinions, or forecasts provided in this article is not guaranteed.