If you’ve ever wondered whether investing is worth the hype, 2024 delivered a resounding "yes" to that question. The U.S. markets once again showcased their potential, delivering impressive returns for investors.
The market winning streak in 2024 was fueled by solid economic growth, declining inflation from historically high levels, interest rate cuts by the Federal Reserve and robust corporate earnings. November added yet another big bang to nearly all U.S. stocks as investors drove the market higher after the re-election of President Donald Trump. Trump’s campaign promises, if delivered, could mean cutting corporate taxes as well as the continuation of lower tax policies that were set to sunset under the Tax Cuts and Jobs Act (TCJA) in December 2025.
As more dollars continue to funnel to the consumer, strong economic growth is expected to continue if inflation stays at bay. Trump is also expected to lighten regulation on several key industries, including financial services, adding additional optimism for strong corporate profits in 2025 and beyond.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Adding fuel to the fire, the artificial intelligence (AI) boom ignited a second consecutive year of outsized gains for Big Tech stocks, which not only soared to new heights but also propelled the broader market upward. This perfect storm of favorable conditions created a rewarding landscape for smart investors who had their money working for them in the market.
Let’s break it down, highlight some big wins and see how your money could have grown.
A stellar year for U.S. stocks
The S&P 500, a collection of 500 of the largest companies in the U.S., is often used as a snapshot of how the stock market and economy are performing. In 2024, the S&P 500 climbed an impressive 23%, building on a strong 24% gain from the year before. Together, these two years delivered a remarkable compound 53% total growth, the best two-year performance since the late 1990s.
If you had invested $10,000 in the S&P 500 two years ago, your investment would now be worth about $15,300. This shows the power of consistent investing in a diverse group of successful companies over time!
Tech dominates again
Technology stole the spotlight in 2024, with the Nasdaq Composite Index — home to many of the world’s biggest tech companies — soaring more than 28%. If you’d put $10,000 into the Nasdaq at the start of the year, it would now be worth $12,800. And that’s on top of an incredible 84% jump from 2022-2024! Over two years, your $10,000 investment would have grown to an impressive $18,400.
Driving much of this growth were the Magnificent 7 tech giants: Apple (AAPL), Alphabet (GOOGL), Microsoft (MSFT), Amazon.com (AMZN), Meta Platforms (META), Tesla (TSLA) and Nvidia (NVDA). These companies lead the charge in areas like AI, electric vehicles, cloud computing and digital innovation.
Midsize and small stocks show strength
The Russell 2000, a key benchmark for small-cap stocks, posted an 11.5% total return. In comparison, mid-cap stocks in the Russell MidCap index gained 15.3%, performing marginally better.
Despite recent challenges, small-cap stocks are poised for growth in the long term and are an important part of any diversified portfolio.
Foreign markets: A mixed bag
International markets struggled to keep up with the U.S. in 2024, delivering lackluster returns. Emerging markets posted a relatively modest 5% gain, while developed markets barely moved the needle with a 1% increase.
This underperformance can largely be attributed to a mix of economic headwinds. Emerging markets faced challenges such as slower-than-expected economic recoveries, geopolitical tensions and a strong U.S. dollar, which made it more expensive for these nations to service dollar-denominated debt. Developed markets, on the other hand, wrestled with sluggish growth and lingering inflation concerns.
While international stocks underwhelmed in 2024, they could present opportunities ahead as valuations remain relatively attractive and economies stabilize. Investors looking to diversify their portfolios may want to keep a close eye on these markets for potential long-term growth.
Bonds and yields: A complicated picture
The bond market painted a more complex picture in 2024. Yields on 30-year government bonds rose to 4.86%, while shorter-term bonds, such as the two-year Treasury, closed out the year yielding 4.3% — it spent much of the year "inverted.” An “inverted yield curve" is very unusual and refers to situations where short-term interest rates are like or even higher than long-term interest rates.
Normally, investors expect to earn more when holding longer-term bonds because of the added risk and uncertainty over time.
Despite the minimal-yield premium, investing in longer-term bonds still may make sense for those concerned about lower interest rates in the future.
What drives the market?
Markets move based on how companies perform and how investors feel about the economy. Recently, stocks have risen due to excitement about AI, lower inflation and the possibility of the Federal Reserve cutting interest rates.
Looking ahead
There’s a buzz of cautious optimism in 2025. Analysts predict the S&P 500 could see an impressive 8.2% gain — but let’s not forget that markets can be full of surprises. The smartest move? Stick with your long-term plan.
History proves that patience pays. Investing in the S&P 500 over the past decade has yielded substantial returns. If you had invested $10,000 at the beginning of 2014 and reinvested all dividends, your investment would have grown to about $40,170 by the end of 2024. This represents a cumulative return of about 301.7%, or an average annual return of 13.3%.
This impressive growth underscores the value of consistent, long-term investing. By staying the course and allowing your investments to compound over time, you can grow your portfolio exponentially.
Your next steps
For those parking cash on the sidelines or first-time investors shy about putting money to work, this is your moment. Imagine the possibilities: starting small, investing regularly and letting your money grow with the market. Even in uncertain times, the U.S. markets have proven resilient, offering substantial rewards to those who stay invested.
One of the best ways to deploy your money in the market is through dollar-cost averaging (DCA). DCA is a simple and smart investing strategy where you invest a set amount of money each month, regardless of whether the market is up or down. Instead of trying to time the market, which is impossible to do consistently, DCA spreads your investments over time, allowing you to buy more shares when prices are low and fewer when prices are high.
This smart investment framework helps smooth out market volatility and reduces the risk of putting all your money into investments at the wrong time. Over time, your portfolio will grow steadily without you having to guess when to invest.
The strategy of dollar-cost averaging is perfect for building wealth with confidence. Why wait? Begin your investment journey today, and let next year be the one where you start building your financial future.
Related Content
-
How to Save Social Security — Pay More Taxes? Cut Benefits?These proposals to save Social Security may require big changes, but Americans want politicians to act. Are you willing to pay more taxes?
-
How to Retire Early Due to Disability or CaretakingIf you must retire early due to disability or to care for a loved one, these six steps to make it work financially.
-
Here's How Retirement Changes Your TaxesHow you approach taxes in your golden years and in the years before retirement can dramatically impact how much you pay.
-
Stock Market Today: Trump Tariff Worries Pressure StocksStocks swung lower Friday after the White House confirmed it will impose tariffs on Mexico, Canada and China beginning tomorrow.
-
Chevron Stock Declines Despite Another Dividend HikeChevron stock is down Friday after the integrated energy company missed fourth-quarter profit expectations. Here's what you need to know.
-
Why Walgreens Suspended Its DividendWalgreens stock is spiraling Friday after the pharmacy chain suspended its dividend amid continued turnaround plans. Here's what you need to know.
-
Intel Earnings Do Little to Excite Investors: What to KnowIntel stock is struggling for direction Friday after the chipmaker reported a fourth-quarter beat but gave weak guidance. Here's what Wall Street has to say.
-
Visa Stock Rises on Strong Earnings, Bullish OutlookVisa stock is up Friday after the payments company beat expectations for its fiscal 2025 first quarter and raised its outlook. Here's what you need to know.
-
Apple Stock Climbs to the Top of the Dow After EarningsApple stock is higher Friday after the tech giant beat expectations for its fiscal 2025 first quarter. Here's what you need to know.
-
If Not Long-Term Care Insurance, Then What?If you don't buy long-term care insurance, how can you plan to cover your long-term care needs once they (most likely inevitably) arise?
