Fisher Investments Reviews Stock Market Lessons from 2024

Don’t Let Scary Headlines Knock You Off Your Long-Term Investment Plan

When it comes to media headlines, there is never a dull moment. 2024 was no exception. Countless headlines drove fear—or sometimes greed—amongst investors this year. Despite the barrage of swirling narratives and occasional setbacks along the way, markets steadily marched upwards.

A small sample of the year’s headline-worthy moments can be seen in exhibit 1. These events were just a fraction of the newsworthy moments stocks digested and moved on from. For short-term minded investors, many of these events could have been a catalyst to deviate from their long-term goals and get out of the market—a common investing blunder. However, investors that remained disciplined amid the overabundance of news were rewarded. In our view, there can be legitimate reasons to adjust your investment strategy, but overreacting to intentionally dramatized headlines isn’t one of them.

Exhibit 1: 2024 Was Not a Quiet Year in Headlines

Source: FactSet, as of 1/2/2025. MSCI World Price Index Return, 1/1/2024 – 12/31/2024.

For many investors, it can seem surprising to realize impressive stock market returns in a world as tumultuous as ours. With that in mind, let’s take a closer look at two key developments from 2024 that investors were particularly tuned into.

Presidential Term Cycles Still Work

Many investors believe presidential election years must be bad for stocks given all the uncertainty and political rhetoric. However, history paints a different picture. As exhibit 2 shows, election-year returns are positive 84% of the time in presidential election years with solid average returns.ⁱ

Exhibit 2: Presidential Term Anomaly

Source: Global Financial Data, as of 1/2/2025. The S&P 500 Total Return Index is based upon GFD calculations of total returns before 1971. These are estimates by GFD to calculate the values of the S&P Composite before 1971 and are not official values. GFD used data from the Cowles Commission and from S&P itself to calculate total returns for the S&P Composite using the S&P Composite Price Index and dividend yields through 1970, official monthly numbers from 1971 to 1987 and official daily data from 1988 on.

During election years, markets benefit from falling political uncertainty as elections near. Politicians also typically focus more on campaigning than passing laws, resulting in lower legislative risk and fewer surprises—an environment stocks typically enjoy.

In 2024, political gridlock reigned, evidenced by the outgoing Congress having passed the least amount of legislation of any Congress going back decades.ⁱⁱ 2024 had its own unique developments, but the combination of gridlock and falling uncertainty played out and stocks marched onward—validating yet again that the presidential term cycle is alive and well.

Central Bank Decisions Don’t Dictate Where the Market Moves Next

Whether the Fed (and other major central banks) were going to cut short-term interest rates was a major talking point amongst investors entering 2024. Some believed rate cuts were necessary for the bull market to continue. So, what do rate cuts—or hikes—mean for stocks looking forward?

In our view, rate cuts—or hikes—aren’t reliable predictors of future returns. Fed-policy turning points (i.e., when rate hikes or cuts start) also haven’t historically influenced stocks path forward. One way to determine the impact of a rate change, demonstrated in exhibit 3, is to look at the 12-month period following the initial rate hike (green dots), or rate cut (gold dots) of a cycle. Since 1950, 12-month forward returns were positive a little over 70% of the time.

Contrary to common belief, returns following Fed rate hikes have been more consistently positive than periods following rate cuts. However, average returns have still been frequently positive after a cutting cycle begins—indicating it’s usually a good period to be invested—as we saw in 2024.

Exhibit 3: S&P 500 Returns Following Monetary Policy Turning Points

Source: FactSet, as of 1/2/2025. S&P 500 Price Index Return and Initial rate cute dates of each interest rate cycle, 1/1/1950 – 12/31/2024.

Stocks had been doing just fine prior to the Fed announcing their first cut in September. With that said, it’s important to remember monetary policy is just one of many factors affecting the economy, and we would caution investors from putting too much emphasis into central bank decisions.

As we saw in 2024, there were plenty of headlines that could have led seemingly disciplined investors to make potentially damaging behavioral investing mistakes. The lessons provided by markets in a newsworthy 2024 remind us once again that looking beyond the headlines is often the appropriate approach for disciplined, long-term investors.

Want to Dig Deeper?

In this article, we discussed investing takeaways from 2024, including how election years are typically strong for stocks and whether rate cuts are as impactful as some believe. For a closer look at how 2024’s U.S. election results may affect stocks moving forward, you can read Fisher Investments’ Market Insights article, "Fisher Investments Reviews the Results of the US Presidential Election.”

For more on the reaction to the Fed’s September rate cut, you can read Fisher Investments’ MarketMinder article, “The Fed’s Big Cut Meets Cognitive Dissonance.”

For more market insights from Fisher Investments, read our latest articles.

Investing in securities involves a risk of loss. Past performance is never a guarantee of future returns. The results for individual portfolios and for different periods may vary depending on market conditions and the composition of the portfolio. Investing in foreign stock markets involves additional risks, such as the risk of currency fluctuations. The foregoing constitutes the general views of Fisher Investments and should not be regarded as personalized investment advice. Nothing herein is intended to be a recommendation. The opinions expressed are subject to change without notice.

ⁱSource: Global Financial Data, as of 1/2/2025. The S&P 500 Total Return Index is based upon GFD calculations of total returns before 1971. These are estimates by GFD to calculate the values of the S&P Composite before 1971 and are not official values. GFD used data from the Cowles Commission and from S&P itself to calculate total returns for the S&P Composite using the S&P Composite Price Index and dividend yields through 1970, official monthly numbers from 1971 to 1987 and official daily data from 1988 on.

ⁱⁱSource: govtrack.us, as of 11/26/2024. Bills enacted by congressional session, daily, 1/3/1973 – 11/26/2024.