The S&P 500, a benchmark index closely followed by 401(k)s, witnessed an impressive surge of nearly 28% this year. The tech-driven Nasdaq experienced an even more remarkable climb of 34%, while the Dow Jones Industrial Average rose by 16%.
This consecutive year of strong stock market performance has left analysts grappling with a crucial question: Will the high stock prices deter potential investors in 2025, or will the prevailing momentum propel shares even higher? Experts anticipate that tailwinds will continue to drive stocks upward in 2025, but they caution about heightened uncertainty that could either hinder further gains or amplify them. The most significant unknown for the stock market in 2025, they emphasize, is the incoming President, Donald Trump. 'As we conclude 2024 and look ahead to 2025, the uncertainties this time appear to be of an exceptional magnitude,' state Kevin Gordon and Liz Ann Sonders, investment strategists at Charles Schwab. 2024 brought positive news for the stock market, partly due to the economy's resilience, defying predictions of doom. The economy maintained a steady growth trajectory in 2024, while inflation took a downward turn. This performance kept the U.S. on track for robust 2.8% annualized growth over the three months ending in September, the latest period for which data is available. 'U.S. strength remains undiminished,' Seema Shah, chief global strategist at Principal Asset Management, told ABC News. Inflation has significantly eased from its peak of over 9% in June 2022. A prolonged period of progress earlier this year encouraged the Federal Reserve to initiate its first interest rate cuts in four years. In recent months, the Fed has reduced its benchmark rate by three-quarters of a percentage point, easing its fight against inflation and providing relief for borrowers facing high costs. Over time, rate cuts alleviate the strain on borrowers for various needs, from home mortgages to credit cards to automobiles, making borrowing or refinancing more affordable
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