Snapshot
Despite pulling back in December, U.S. stocks (S&P 500 Index) posted another quarterly gain, which lifted the index’s year-to-date return to 25%. Non-U.S. stocks underperformed U.S. stocks in December and in the quarter. U.S. bonds also declined for both periods.
- Alongside a more tempered Fed rate-cut outlook, U.S. stocks declined more than 2% in December. But earlier gains, particularly in the wake of November’s election results, left the S&P 500 Index with a 2.4% fourth-quarter return.
- Most S&P 500 Index sectors declined in December and for the quarter. Only three of the index’s 11 sectors posted December gains. For the quarter, four sectors advanced, led by Consumer Discretionary, up 14.3%.
- Non-U.S. developed markets stocks struggled, and they sharply lagged U.S. stocks for the quarter. The broad emerging markets index underperformed non-U.S. developed markets stocks.
- Despite still-above-target inflation and solid economic growth, the Fed cut rates by 50 bps in the fourth quarter. In December, policymakers raised their inflation forecast and cut their easing outlook. The European Central Bank cut rates twice, while the Bank of England eased in November but held steady in December.
- Annual U.S. headline inflation rose to 2.7% in November from 2.4% in September. Inflation also climbed in Europe and the U.K.
- In the U.S., large-cap stocks outperformed small-caps in December and for the quarter, and growth outpaced value. Outside the U.S., developed markets’ size and style indices fell for both periods.
- U.S. Treasury yields rose for the month and the quarter, and the broad U.S. bond market declined. However, bonds delivered a year-to-date gain.