December 31st Market Overview

Happy New Year's Eve.

Today marks the last trading day of 2024 as the S&P 500 achieves its second consecutive year of 20%+ gains, something that hasn’t happened since late 1990s. While today’s red across major indices the Dow might close green, we are seeing some year end profit taking coming out of this years huge tech momentum.

Tomorrow the market is closed so no letter from me 🥂

Let's dig in...

Executive Summary

• Big milestone: S&P 500 achieves second consecutive 20%+ annual gain, marking best two-year performance since 1997-1998
  

• Year-end profit-taking hits major tech leaders, triggering rare four-day decline to close December. Santa rally is not in affect this year…
  

• Small-caps continue to lag, with Russell 2000 up just 10.2% compared to broader market’s stellar performance
  

• Bond market concerns emerge as 10-year yields hover above 4.5%

Market Overview

Key Market Drivers

1. Year-End Profit Taking: Active selling pressure in tech sector during final trading sessions is impacting market sentiment
   

2. Treasury Yield Pressure: 10-year yield’s climb above 4.5% creating headwinds for equity valuations
   

3. Market Breadth Improvement: NYSE showing 3-to-1 advance-decline ratio in final session, suggesting broader participation
   

4. Small Cap Underperformance: Russell 2000’s modest 10.2% yearly gain highlighting ongoing market concentration concerns in tech

5.  Do you have insurance for your pet? 
   

Stock Spotlight

• $PLTR: ▲ 350.3% in 2024, leading S&P 500 performers on AI optimization capabilities

• $NVDA: ▲ 177.7% year-to-date, though facing late December profit-taking pressure

• $INTC: ▼ 59% in worst yearly performance of its 56-year history, struggling with AI transition

• $X: ▲ 7% on latest Nippon Steel proposal including U.S. government oversight provisions

• $VST: ▲ 262.2%, second-best S&P 500 performer of 2024

Big Name Updates

• $AAPL: 30% yearly gain despite December weakness, reaching multiple record highs

• $JPM, $GS: Financial sector leaders posting 41% and 48% gains respectively

• $TSLA: 64% advance bolstered by post-election momentum

• $VRSN: Berkshire Hathaway increases stake to 13.8% through recent 76,487 share purchase

Other Notable Company News

• $BHVN: Director John Childs demonstrates confidence through 29,000 share acquisition

• $SGMO: ▼ 54% after Pfizer terminates hemophilia therapy partnership

• $MU: Cryptocurrency-linked tech stocks benefit from Bitcoin’s rise above $100,000

Sector Watch

Bond Market

Ten-year Treasury yield settles at 4.57% to close 2024. BMO Wealth Management’s CIO warns of potential market headwinds should yields breach 5% threshold.

Fourth quarter marked significant shift in yield curve dynamics, potentially impacting both equity and fixed income markets heading into 2025.

Policy Watch

• President-elect Trump's November victory shifting market focus to potential 2025 policy changes, with financial stocks like $JPM and $GS already up 41% and 48% respectively on anticipated policy shifts
  

• Banking sector surging on expectations of looser regulatory environment, driving broad financial sector gains as reflected in $XLF's positive performance
  

• U.S. Steel ($X) deal with Nippon Steel introducing new precedent for government oversight, giving U.S. authorities veto power over production capacity changes in strategic acquisitions
  

• Federal Reserve's aggressive rate-cutting cycle since September marking the most significant policy shift of 2024, boosting confidence in sustained economic growth
  

• 100 basis point reduction in rates since September fundamentally altering market dynamics, particularly benefiting growth stocks and supporting broader market valuations
  

• Economic indicators aligning with Fed's dovish stance, supporting the central bank's current policy trajectory while inflation continues its slow downward trend

What to Watch

1. Tech Sector Momentum:

• AI narrative sustainability entering 2025

• Profit-taking impact on market leaders

• Small-cap tech recovery potential

2. Interest Rate Trajectory:

• 10-year yield proximity to 5% threshold

• Fed policy adjustment pace

• Impact on growth vs. value stocks

3. Market Breadth Development:

• Russell 2000 performance gap

• Sector rotation patterns

• Leadership diversification beyond tech

P.S. 

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- John