Vector’s quarterly statement on markets and the economy.

On any given day, the odds of the S&P 500 ending in the green are around 53 percent. Nearly the same odds as the flip of a coin. On the surface, participating in a daily venture where half the time you lose may seem counterintuitive.

However, provide a time horizon beyond days, weeks, or months and you’ll soon develop the rationale for investing. One-year periods, historically up 74% of the time. Got a five-year horizon? Up 88% of the time. Zooming out to 10-year periods and being invested has returned a positive result 95% of the time.

“History Doesn't Repeat Itself, but It Often Rhymes” – Mark Twain.

Predicting where the markets are moving today, or in a year is anyone’s guess. We do predict where stock prices are headed this week or this year; uncertainty is certain. Instead, we are strong advocates of studying history and modeling outcomes. Zooming out, and with five or ten years on our side, we gain confidence that markets will move up and to the right over time.

“Your plans should drive the investment mix, not the other way around” – Vector.

As you may already know, Vector’s approach to planning and investing is based on time horizons. Once we understand your time horizon, spending plan, and goals, we create a unique investment mix with you at the center. Sometimes referred to as bucket-based investing, this plan connects your financial life with your investment policy.

Year in Review: Market and Economic Highlights

2024 was a year that saw remarkable resilience in the economy and financial markets. Recession concerns, inflation, Federal Reserve (Fed) policy changes, and the November elections were just a few dominant headlines.

U.S. economic growth accelerated, and inflation spent much of the year slowing down. This made a favorable backdrop for stocks to shine. The S&P 500 set 57 all-time highs in 2024 and ended the year with a remarkable 25% gain. Only five other times since 1928 has the market hit more all-time highs in a year.

The Mag-7 or magnificent seven are some of the largest, primarily U.S. technology-oriented companies in the market. These stocks, driven by continued advancements in artificial intelligence and semiconductor innovation, performed well and pulled an outsized proportion of the overall market return.  Small U.S. companies were up +11.5% and international markets returned +5.5%.

Market breadth was relatively low in 2024, which we expect will eventually reverse. Look for medium and smaller companies contributing to the broad market performance as a sign of a healthier market.

The Fed’s much-anticipated interest rate cuts captured the narrative for much of the past year. In bond markets, short-term interest rates declined while longer-term rates increased–leading to a steepening yield curve. Why it matters; with higher interest rates, higher yielding bonds and fixed-income assets can dampen volatility when included in a diversified portfolio.

Short-term uncertainties are inevitable, but history demonstrates the ability of markets to recover and grow over time. We continue to advocate for portfolio strategies that ensure near-term liquidity needs are met while positioning longer-term investments to benefit from potential market growth. We believe this approach can also provide peace of mind during periods of uncertainty.

For a deeper discussion on markets, investing, and the economy, check out our recent podcast episode titled “2025 Market and Economic Outlook.” Available at vectorwealth.com/blog.

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