Market themes of the year

There were plenty of trends that emerged this year, from absurd TikTok memes to more absurd TikTok memes.

Other 2024 highlights included:

• The most-streamed song of the year: Espresso, by Sabrina Carpenter
• The most-visited Wikipedia page of the year: Deaths in 2024
• The most-read newsletter of the year: Brew Markets

Although there are plenty of themes from 2024 for historians to analyze, three truly moved markets.

The Fed

Markets entered the year positive that the Federal Reserve was on the cusp of up to half a dozen interest rate cuts, maybe more. Investors hoped that rate cuts could spur economic growth and prop up companies’ bottom lines—but the reality was that the final tidbit of inflation proved to be stickier than anyone thought.

Thankfully, inflation growth had slowed enough by the second half of the year that it seemed Jerome Powell was finally ready to give cuts the green light. But what no one saw coming was a problem with the other half of the Fed’s dual mandate: keeping the labor market healthy.

The market’s worst day of the year came on August 5, after a disappointing jobs report spooked investors, who were suddenly worried that the Fed had spent so much time and energy focused on fixing inflation that it forgot to keep an eye on the labor market.

By the time the first cut came in mid-September, investors were more than ready for it—but what they weren’t prepared for was the size of the cut. A 50 bps slash was more than most of Wall Street saw coming.

Still, the old adage of “buy the rumor, sell the news” held true. Markets actually sagged a bit following the first cut since interest rates were first hiked back in March 2022, though they quickly continued to march higher through the end of year. The latest cut earlier this month sent markets into a tailspin after investors realized fewer cuts lay ahead in 2025, the Fed’s every move will continue to dominate market headlines next year.

AI

While all eyes were on every FOMC meeting, PCE report, and labor market announcement, one theme continued to underpin the market’s rally in 2024: AI.

Nvidia led the charge higher this year, rising nearly 180% as AI investments across the economy spurred on continued purchases of semiconductor chips. The semi king’s earnings announcements became must-watch news, propelling the market to new heights quarter after quarter.

Sure, companies like Broadcom have recently begun to catch investor attention as well, but after a stock split earlier this year, Nvidia’s shares are cheaper than they have been in ages, and the company continues to dominate this space.

That said, 2024 brought us a broadening of the AI theme. Utilities was a shockingly hot sector this year as investors realized that all of this demand for AI will mean more demand for energy. Big tech companies made some enormous investments in electricity generation, including Microsoft paying to restart the nuclear reactor at Three Mile Island.

2025 is likely to bring more of the same—perhaps not the spectacular gains AI stocks have enjoyed over the last few years, but as the AI industry evolves, there’s still plenty of room for more winners to emerge.

The Election

The final market-moving theme of 2024 was clearly the presidential election. Though the race was a tight one for most of the year, that all changed after a failed assassination attempt on former President Donald Trump in July sent his chances of winning through the roof. The so-called “Trump Trade” spurred a rally for any investments even tangentially connected to Trump, from Trump Media & Technology Group to Tesla to bitcoin.

But the Democrats struck back in September when they replaced President Biden with Vice President Kamala Harris on their ticket. Suddenly, a “Harris Trade” was the talk of the town, and green energy stocks soared.

It all came to a head in November when former President Trump became President-elect Trump. Anything Harris-related tanked while Trump-related sectors soared—specifically bitcoin, which rode the election wave all the way above $100,000 for the first time ever just a few weeks later.

President-elect Trump’s every move and social media post will continue to shake markets next year, as investors wonder what higher tariffs, stronger immigration laws, and political mudslinging will bring in 2025.—MR