A lot happened in 2024, some good and some bad. The fighting in the Middle East and Ukraine continued with no end in sight for either. There was a total eclipse of the sun early in the year, bringing in an estimated $6 billion in revenue for the country. Taylor Swift’s worldwide Eras tour had over $2 billion in ticket sales, double the gross of any concert tour in history. The consumer continued to spend, despite higher interest rates. Retail sales rose 3.8% this holiday season, up from 3.1% in 2023. Despite the spending, 48 companies filed for bankruptcy this year. Inflation is down more than half a percentage point and is at half the peak rate of 6.6%. Unemployment increased from 3.7% to 4.2%, the highest rate in three years. The economy fought off a recession and expanded 2.6% through the third quarter of 2024. Last but not least, the United States elected a new president to govern our country for the next four years. The new administration will be focused on key issues that could have a substantial impact on the economy. Changes to immigration, taxes, trade and climate change, to name a few, will affect employment, inflation and the deficit in ways too difficult to project at this time.

Which brings us to the financial markets. Treasury yields defied expectations by closing 70 basis points higher in a year that the Federal Reserve cut interest rates by 100 basis points. The two-year yield finished 2024 just one basis point lower after trading in a 150 basis point range. The yield curve returned to a positive slope for the first time since 2022. The stock market closed out 2024 with the best back-to-back annual gains in years. The three key stock indices finished positive for the fifth out of six years with the Magnificent Seven accounting for 95% of the S&P 500’s gain. The financial markets are expecting another 50 basis points of rate reductions in 2025 and another positive, albeit not as sterling, year in the stock market. That is the prediction as of today, but as we well know, anything is possible.

Housing – Mortgage rates closed out the year on a high note at 6.91%. While not the highest level reached in 2024, the FHLMC 30-year mortgage year-end rate is 83 basis points above the lowest level reached in September. Still, the rise in rates is not preventing homebuyers from signing on the dotted line. New, existing and pending home sales increased in November as homebuyers came to terms with higher rates and took advantage of improving inventory. According to the National Association of Realtors’ Chief Economist Lawrence Yun, homebuyers “are no longer waiting for or expecting mortgage rates to fall substantially.” Pending home sales, a measure of contract signings, increased for the fourth month to the highest level since early 2023.