Quarterly Market Review - Q4 2024

Welcome to the RPAG Quarterly Market Review for Q4 2024, where we discuss U.S. equity markets, international equities, the broad U.S. fixed income market, market valuations, and much more.

• Jeff Elvander, CFA, Chief Investment Officer

Summary

Equity markets were mixed over the quarter, with U.S. equities posting small positive returns amid large negative returns internationally. Fixed income markets were also negative over the quarter, as long-term rates rose. U.S. equities rose 2.6% (Russell 3000) over the quarter with consumer discretionary stocks leading the way. Large cap growth was the best performing style in 2024, outperforming large cap value by almost 2000 basis points (33.4% for Russell 1000 Growth vs. 14.4% for Russell 1000 Value). International equities and Emerging Markets equities struggled over the quarter, posting losses of -8.1% (MSCI EAFE) and -8.0% (MSCI Emerging Markets), respectively. The broad U.S. fixed income market returned -3.1% (Bloomberg Barclays Aggregate) over the quarter. The Fed cut rates by 25 basis points twice over the quarter; however, longer term rates such as the 10-year treasury rate, rose by almost 80 basis points over the period. The unemployment rate remained flat from last quarter at 4.1%.

Quarterly and year-to-date returns of the following indices: U.S. Equity (Russell 3000 Index), Fixed Income (Bloomberg Barclays U.S. Aggregate Bond Index) and International Equity (MSCI ACWI ex U.S. Index).

U.S. Equity

• The broad U.S. equity market, as measured by the Russell 3000 Index, was up 2.6% for the quarter.
• The best performing U.S. equity index for the quarter was Russell 1000 Growth, returning a positive 7.1%.
• The worst performing U.S. equity index for the quarter was Russell 1000 Value, returning a negative 2%.

Over the last year, growth stocks outperformed value stocks by 19.00%. For the trailing quarter, growth stocks outperformed value stocks by 9.10%.

The graph above is plotted using a rolling one-year time period. Growth stock performance is represented by the Russell 1000 Growth Index. Value stock performance is represented by the Russell 1000 Value Index.

International Equity

• Developed international equity returned a negative 8.1% in the last quarter (MSCI EAFE).
• Emerging market equity posted a negative 8% return (MSCI Emerging Markets Index).
  

Fixed Income

• The broad U.S. fixed income market returned a negative 3.1% (Bloomberg Barclays U.S. Aggregate) for the quarter.
• The best performing sector for the quarter was Cash, returning a positive 1.2%.
• The worst performing sector for the quarter was Mortgage-Backed Securities, returning a negative 3.2%.

U.S. Vs. International Equity Market Valuations

The fourth quarter of 2024 continued the recent trend of U.S. equity markets outperforming international equity markets. While in recent years international equity markets have experienced a few periods of outperformance, U.S. markets have largely maintained their dominance. As shown in the chart below, the differential between U.S. and ex-U.S. equity market valuations on a forward P/E (price-to-earnings) basis highlights this trend. The valuation discount for international equities is now more than two standard deviations below its average over the past 20 years- the widest margin during this period. This indicates that international equities have not been this relatively cheap in a long time.

Source: FactSet, MSCI, Standard & Poor’s, J.P. Morgan Asset Management. Guide to the Markets – U.S. Data are as of December 31, 2024.

Download a copy of this market review document by clicking here, or contact us at the email address below.

________________________________________