We’re closing the book on 2024 and taking a look at what 2025 might hold.
As of today, December 16, 2024, here are the stock market gains for the past 12 months:
- S&P 500: +29%
- NASDAQ: +35%
- Dow 30: +17.5%
- Russell 2000: +18.5%
- TSX (Canada): +22.8%
My own portfolio is split 50% in the S&P 500 and 50% in the TSX, giving me an average return of about 26%. Not bad!
Unless something unexpected happens in the final days of the year, 2024 will be remembered as a stellar year for stock investors.
Why Was 2024 So Strong?
The main reason for these spectacular gains lies in the exceptional quality of U.S. companies, particularly in technology, pharmaceuticals, and energy. Here are a few examples:
- Nvidia (NVDA): +138%
- Vistra Corp. (VST): +216%
- Constellation Energy (CEG): +126%
- Eli Lilly (LLY): +95%
- Meta Platforms (META): +70%
- Tesla (TSLA): +65%
- Microsoft (MSFT): +55%
- Alphabet (GOOGL): +40%
- Amazon (AMZN): +38%
- Uber Technologies (UBER): +35%
The United States has a unique ability to create industries and companies that dominate globally. It also attracts talent from around the world.
Take Elon Musk, for example. Born in South Africa, he lived in Canada for about three years before moving to the U.S., where he launched Tesla, SpaceX, and other ventures. He could have stayed in Canada, but the U.S. has a way of drawing ambitious entrepreneurs.
Other talented individuals who emigrated to the U.S. include:
- Sundar Pichai, CEO of Alphabet (Google), from India.
- Satya Nadella, CEO of Microsoft, from India.
- Arvind Krishna, CEO of IBM, from India.
- Laxman Narasimhan, CEO of Starbucks, from India.
India has been a significant contributor to U.S. economic success. These leaders came to the U.S. because it offered them opportunities to achieve more than they could achieve in their home countries.
Global Capital Flows into the U.S.
It’s not just entrepreneurs flocking to the U.S.—global investors are, too.
- When a Canadian financial advisor suggests diversification, they mean buying U.S. stocks.
- When advisors in Berlin, London, or Singapore talk about diversification, they recommend adding U.S. equities to their clients’ portfolios. So you have all those investors from all over the world sending their money to the U.S.
- My own portfolio is divided between Canadian and US equities.
The U.S. has the most liquid and transparent stock market in world. This is where capital and entrepreneurs meet. A company like Tesla or Space X, would have never been able to exist in Europe. They have too many regulations and investors are more conservative, so they would have never invested in an electric vehicle company, they would have never invested in a rocket company. Europe is good at creating designer bags and bottle of sparkling wine. At present, 70% of the world’s capital is invested in U.S. securities (stocks, bonds, private equity, and government bills). This is up from 30% in the 1980s—an extraordinary shift, especially given that the U.S. represents only 4% of the global population.
This influx of capital has strengthened the U.S. dollar and reinforced the dominance of U.S. markets.
In 2024, 88 companies moved their primary listing from London to New York, seeking deeper investor pools and better liquidity.
The Future Outlook
Investing so much capital in U.S. equities is not without risks, but I see no compelling reason to put money in Europe or Asia.
- Europe: Over-regulated and lacking a risk-taking mentality, Europe has failed to produce major tech players.
- China: While competitive in some areas, China’s market is controlled by the Communist Party, lacking transparency and freedom.
For now, the U.S. remains the primary option.
Promising Sectors for 2025
- Artificial Intelligence (AI): Innovations from companies like Google, Microsoft, and OpenAI, as well as new entrants, could drive growth.
- Energy: The demand for energy—including nuclear power—is likely to rise.
- Pharmaceuticals: GLP-1 drugs, which have gained popularity, are expected to fuel growth in this industry.
- Quantum Computing: Google has made strides in this area, and breakthroughs could be on the horizon.
Now it’s your turn
What’s your take on 2024? What do you expect in 2025? Share your thoughts in the comments!
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