As 2024 draws close, U.S. stocks have entered the year's final month with strong momentum. By the end of November, the Dow Jones Industrial Average had risen 19.2%, the S&P 500 was up 26.5%, and the Nasdaq had gained nearly 30%.

Looking back on 2024, we saw early surges in gold and Bitcoin, with AI continuing to drive trends. The year also brought recession fears in early August and heightened anticipation for the U.S. presidential election in November. Treasuries and the U.S. dollar fluctuated based on evolving economic expectations.

Despite market volatility, investors have reaped substantial rewards. Since Donald Trump's electoral victory, the S&P 500 has surged past the 6,000-point mark, with widespread expectations for a strong year-end close.

The S&P 500 rose 24% in 2023. If it maintains a gain of over 20% by year-end, it will set a record for consecutive annual increases this century—a rare feat in the U.S. equity history.

The last time this happened was a century ago during the 'Roaring Twenties,' a time of rapid economic growth and stock market prosperity. More recently, from 1995 to 1999, the S&P 500 enjoyed over 20% growth for four consecutive years, ending with a 19% increase in 1999. However, these sustained gains were followed by the Great Depression and the dot-com bubble burst.

As we look ahead, what might the markets bring next year? Can past stellar performances be sustained? Let's delve into this week's Opportunity Mining.

Optimism with economic resilience

According to UBS, the world has faced pandemic lockdowns and major conflicts in Eastern Europe and the Middle East since 2020, alongside the most significant inflation and interest rate surges in decades.

During this period, the U.S. nominal GDP grew by over 30%, corporate profits surged 70%, and AI, led by ChatGPT, emerged as a key trend, delivering notable returns for investors.

UBS suggests that with high economic growth, strong market returns, and rising productivity, this era is increasingly likened to a new "Roaring Twenties." The market boom is expected to continue into 2025, with the S&P 500 potentially reaching 7,000 points in a favorable scenario.

Goldman Sachs indicates a positive outlook for the U.S. economy: recession fears have dissipated, inflation is on track to the 2% target, and the labor market remains robust. Consumer spending continues to be the main driver of economic growth, supported by real income growth from a hot labor market and a wealth effect from market prosperity.

Data shows that in the first three quarters of 2024, consumption contributed 78% to U.S. GDP growth. Inflation-adjusted consumer spending grew 3.0% year-on-year in the third quarter, up from 2.7% in the second quarter, driven by strong growth in real after-tax income.

This is for illustration purposes only, and any statement involved does not constitute investment advice.

Policy uncertainty

Trump's potential return to the White House and a Republican sweep in Congress could result in significant policy changes impacting the economy and market performance. While details are unclear, anticipated policy shifts include tax cuts, increased tariffs, deregulation, and stricter immigration controls.

Goldman Sachs posits that Trump's choice to raise tariffs and cut domestic taxes simultaneously could offset the impact on S&P 500 earnings per share. Given the strong economic outlook, S&P 500 EPS is expected to continue its upward trajectory over the coming years.

This is for illustration purposes only, and any statement involved does not constitute investment advice.

The firm indicates that while policy expectations may shift, they are unlikely to significantly affect economic or monetary policy. Analysts forecast that by the end of 2025, the core PCE data—excluding the effects of tariffs—will drop to 2.1%. However, if tariffs are considered, this figure could rise to 2.4%.

Fidelity suggests the most likely scenario for the U.S. economy in 2025 is reflation. Strong consumer spending, robust household balance sheets, and a resilient labor market, combined with new government reforms, increase the likelihood of inflation rising from the second quarter of 2025. Both soft landing and stagflation scenarios have a 20% probability, while the chance of a recession is only 10%.

Inclusive rally?

Most institutions are optimistic about U.S. stocks for the upcoming year. Fidelity highlights that recent trends are expected to persist, and new growth opportunities may arise, which could excite stock investors.

In 2024, the S&P 500's earnings growth was primarily driven by large tech stocks, represented by the "Magnificent Seven." In 2023, these giants contributed 63% of the S&P 500's returns, and by November 2024, they still accounted for nearly half of the index's gains.

JPMorgan forecasts that earnings growth for the "Magnificent Seven" will slow to 20% in 2025, still a solid pace but with a notable acceleration in the rest of the market's earnings growth. AI will remain a market focus but with more balanced participation.

This phenomenon is an "Inclusive Rally," where most stocks or market sectors rise together, rather than a surge driven by a few large stocks or a specific sector. Such a trend is typically seen as a sign of a healthy market, indicating broad participation and upward momentum.

The firm suggests that deregulation and corporate tax cuts may give investors confidence to buy into previously neglected areas, such as value stocks and small to mid-cap stocks, which could benefit from an earnings recovery and attractive valuations.

In terms of industry segments, sectors like industrials, energy, and materials, which have seen low earnings in recent years, are expected to recover as consumer and corporate capital-intensive spending resumes.

Past performance does not guarantee future results. This is for information and illustrative purposes only. It should not be relied on as advice or recommendation.

If you maintain a bullish outlook on the market, index ETFs could be an option.

Some of the larger ETFs that track the S&P 500 are $Vanguard S&P 500 ETF (VOO.US)$ and $SPDR S&P 500 ETF (SPY.US)$ , both offer good liquidity and low expenses. VOO has exceeded $1 trillion in size, while SPY has more than $600 billion.

In addition, the value stocks and small-to-mid-cap stocks favored by JPMorgan also have corresponding ETFs, with larger ones including $Vanguard Value ETF (VTV.US)$ and $iShares Russell 2000 ETF (IWM.US)$ .

Related risks

Unexpected Inflation: The Federal Reserve might pause rate cuts or even hike, affecting market performance.

High Valuations: The S&P 500's price-to-earnings ratio has risen by a quarter over the past two years. As of November 2024, it stands at the 93rd percentile historically, indicating high valuations. If earnings growth falls short of expectations, a market correction could ensue.

Geopolitical Risks: Escalating trade disputes or regional conflicts could affect economic performance and investor confidence.

Additional Disclosures: This content is also not a research report and is not intended to serve as the basis for any investment decision. The information contained in this article does not purport to be a complete description of the securities, markets, or developments referred to in this material. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Furthermore, there is no guarantee that any statements, opinions or forecasts provided herein will prove to be correct.

This presentation is for informational and educational use only and is not a recommendation or endorsement of any particular investment or investment strategy. Investment information provided in this content is general in nature, strictly for illustrative purposes, and may not be appropriate for all investors. It is provided without respect to individual investor's financial sophistication, financial situation, investment objectives, investing time horizon, or risk tolerance. You should consider the appropriateness of this information having regard to your relevant personal circumstances before making any investment decisions. Past investment performance does not indicate or guarantee future success. Returns will vary, and all investments carry risks, including loss of principal. Moomoo makes no representation or warranty as to its adequacy, completeness, accuracy or timeline for any particular purpose of the above content.