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Capital Markets Commentary

Stocks exhibited mixed performance throughout the fourth quarter, marked by robust activity in cyclical sectors but offset by weaker performance in defensive sectors. The quarter was shaped by the U.S. presidential election, with Donald Trump securing a return to the White House. The Federal Reserve’s pace and scope of future actions garnered significant attention; projected cuts were adjusted to 50 basis points in 2025, down from an earlier consensus of 100. The U.S. economy demonstrated resilience, reflected in decreasing inflation, strong consumer spending, and a relatively stable labor market. This economic environment contributed to the S&P 500 Index achieving a modest total return of 2.4% for the quarter, while the Equal Weighted S&P 500 Index declined by 1.9%.

Consumer Discretionary led the sectors this quarter, accompanied by strong performances in Communication Services, Financials, and Technology. Conversely, Materials and Healthcare sectors struggled, each posting declines of more than 10%. All sectors, except Materials, recorded positive returns year-to-date.

Small-cap and international stocks under performed the S&P 500 for the quarter. The Russell 2000 Small Cap Index posted a slight gain of 0.3%, while the MSCI International Index declined by 8.1%.

Interest rates moved higher during the quarter; the 2-year Treasury rate rose by 60 basis points to close at 4.24%, and the 10-year Treasury rate increased by 78 basis points to end at 4.57%. Meanwhile, the Barclays Aggregate Bond Index declined by 3.1% for the quarter.

Source: Morningstar