2024 in Review

Happy 2025! Hopefully the amount of times we hear “post pandemic world” significantly decreases this year. Let’s take a quick look back at the stock market and inflation.

The Stock Market 

This year, the S&P 500 rose 23.96%, the NASDAQ rose 29.83%, and the DOW rose 13.25%. Even with a bummer market in December (down 2.54%), the S&P 500 still doubled the historical average of 10.13%. After a 22% decline in 2022, the past two years have been bolstered by a positive outlook on inflation, lower fed interest rates, and the AI boom that mimics the dotcom boom of the 2000s. 

Speaking of which, the S&P 500 set a record in July with the “Magnificent 7” companies making up 35% of the index. These 7 stocks (Apple, Microsoft, Alphabet (Google), NVIDIA, Tesla, Meta, and Amazon) accounted for nearly 50% of the earnings this year. This beats the concentration seen in 2000-1 before the dotcom crash. Apart from crashes, higher concentration in the index historically leads to lower returns. 

This concentration increases the risk of only investing in the S&P 500. While you are diverse with 500 companies, the imbalance of the top seven increases the risk of one company ruining your earnings. You can increase diversity through small-cap and mid-cap index funds. Total market index funds are also a great choice, but the magnificent 7 are so big, they still make up a significant portion of these funds. 

The 2024 stock market was dominated with long periods of steady increases and steep, yet short, declines sparked with bad news. The market proved more resilient to high inflation and interest rates above 0 (I refuse to say “high interest rates” because historically, they are still low). Speaking of which…

Inflation and Rate Cuts

In March of 2022, the Federal Reserve began its war on sky high inflation by increasing its benchmark interest rate. By July of 2023, the Fed set and held rates at 5.5% all the way until September 2024 when it succumbed to peer pressure and cut rates. Peer pressure might be an unfair characterization… inflation was trending downwards (albeit not at the 2% goal yet) and the Fed didn’t want to cause a recession. However, inflation ticked upwards in October and November following the cut. I am not saying we were right, but I am saying we did warn that cutting rates too early can lead to higher inflation. So far, inflation has gone the wrong direction since the first cut. We will see if that trend continues in 2025. I hope we were wrong.

President Trump has promised to cut interest rates and raise tariffs, both of which are contradictory to lowering inflation (which is something he also promised to do). Thankfully, the Federal Reserve’s decisions are independent from the President or Congress. The Fed’s higher than 0 interest rates are one of the reasons we saw inflation ease.

We started 2024 with high, stagnant inflation and expensive mortgages. We are ending 2024 with lower, still stagnant inflation and expensive mortgages. It is hard to see the progress, but the fact that the Fed didn’t trigger a recession (yet) is pretty impressive. 

Dollar Debrief Wrapped 

In 2024, Mike and I wrote 52,900 words in our 51 letters with 70% of you legends reading (or at least opening) them on average. We ended the year with 111 subscribers, up 52%! A lot of you shared this with friends, and for that, I thank you. What is an anti-budget, what are itemized deductions, and should I track my net worth were our most read letters each with a 77% open rate.

Call to Action

What do you want to see from the Dollar Debrief in 2025? Do you have any questions we can answer? Reply to this email with your thoughts!

Debrief on Deck

Next week, we will talk about some yearly financial goals. From maxing out IRA contributions to buying dogecoin every month, it’s a real “good, bad, and ugly” situation if you get all your advice from TikTok.

As always, please reach out to us with any questions or comments you have. You can reply directly to this email or find us on Instagram.

Until then, stay the course.

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