In an ongoing effort to bring value to our TSP members, we’re going to expand the content for our weekly reports. While the daily commentary will continue to focus on issues driving shorter-term market action, the weekly posts will focus more on longer-term topics not only as they relate to investments, but also around broader personal financial planning issues as well.
In that vein, our first post for the new year is a recap of 2024 where we’ll offer a few thoughts on maintaining the perspective required to be a successful investor and the current state of the US consumer, share some notes on investing in 2024, and finish with some reasons for big-picture optimism as we look to the future.
I hope you find this helpful as you work towards achieving your financial goals.
First, the Returns…
1. After big returns in 2023, 2024 saw another remarkable year for the C- and S-Funds: Here are the 2024 returns as of December 31, 2024:
G Fund: +4.40%
F Fund: +1.33%
C Fund: +24.96%
S Fund: +16.93%
I Fund: +4.27%
The State of the Consumer:
2. Growth In Household Net Worth Has Been Astounding: Collectively, the American consumer is in the best financial shape they’ve ever been in, with household net worth (assets less liabilities) reaching a record $160 trillion at the end of the 3rd quarter of 2024. Even more staggeringly, just since the start of 2020, household assets have increased by $53 trillion while liabilities have increased by just $4 trillion. That means that for every $1 of debt households have taken on, assets have increased by an incredible $13! As amazing as this is, the financial media simply isn’t covering this.
3. The Economy Is Rolling (And That’s Been Good For Consumers): The U.S. Gross Domestic Product is estimated to have increased by a real rate (exceeding inflation) of 2.7% during 2024. This growth was largely due to low unemployment, wages outpacing inflation, and consumers spending.
4. Good News About Interest Rates And Inflation: Interest rates and inflation impact nearly every consumer, and there was good news on both fronts in 2024. The Fed lowered rates by a full percentage point during the latter half of the year, while notably, most other central banks were also cutting rates. This was all possible because inflation was relatively stable throughout the year while slowly closing in on the Fed’s 2% target. That said, persistent strength in the economy has tempered expectations for further cuts, which was a driving factor behind the F-Funds struggles in Q4.
The State Of Companies:
5. Corporate America Is Doing Quite Well: Analysts expect that 2024 earnings growth for the S&P 500 will be nearly 10%. Moreover, calls for 4th quarter year-over-year earnings growth are 11.9%, which would be the highest earnings growth reported by the index since 2021 when we were still recovering from the pandemic.
6. Worker Productivity Is Booming: Admittedly, this may seem like a boring note, but worker productivity has far-reaching implications as it’s critical to both the company earnings we just noted and overall economic growth. According to the Wall Street Journal, we’ve had five consecutive quarters in which productivity has increased by 2% or more. Obviously, this is good for companies (which is good for the economy and stock market), but more interestingly, the WSJ also noted that raising worker productivity growth by just 0.5% could mean our debt-to-GDP ratio would expand to a much more manageable 108% over the next decade rather than the currently expected 116%. For those who are worried about our national debt, this increase in worker productivity should be a cause for optimism.
The State Of Investing:
7. 57 New All-Time Highs: The biggest news in investing this past year has to be the fact that the C-Fund closed at new all-time highs 57 times in 2024! With about 250 trading days per year, this means about 22% of all trading days ended at an all-time high—that’s an average of more than one new all-time high per week. That’s impressive for a year in which exactly zero “experts” came close to predicting where we’d end up. So much for forecasting. And for “experts.”
8. The Tough Road For Bond Investors Continues: While the F-Fund did eke out a positive return, the real return (after inflation) was paltry. If that’s not enough to be dour about, it’s notable that bonds remain in a historic 52-month drawdown. This is the longest drawdown in half a century, with the next longest streak being a comparatively short 16 months. It will be interesting to see how long this lasts.
Some Reasons for Optimism:
9. Extreme Poverty Is Slowly Being Eradicated: Over the last eight years, about 10% of school-age children (or about 200 million children!) gained access to water, sanitation, and hygiene services at school for the first time. That's a staggering figure and is something we should all be excited about. Most importantly, because we want all children to have everything they need to thrive, but also because it is evidence of our continued progress against poverty. Beyond these needs being met, electricity (inevitably followed by internet access) will soon be on its way as well, as it's estimated that Africa will turn the lights on for another 300 million Africans by 2030. The potential here is beyond incredible.
10. A Few More Things You Probably Didn’t Hear About On The News: “It was a mind-boggling year for material science. Artificial intelligence helped identify a solid-state electrolyte that could slash lithium use in batteries by 70%, and an Apple supplier announced a battery material that can deliver around 100 times better energy density. The world’s first functioning graphene-based semiconductor was unveiled (the long-awaited ‘wonder material’ may finally be coming of age!) and a team at Berkeley invented a fluffy yellow powder that could be a game changer for removing carbon from the atmosphere.” The future is indeed bright, my friends.
As encouraging as those last items are, we didn’t even touch on the possibilities arising from advances in artificial intelligence, developments in nuclear and other clean energy, desalination, and countless other innovations and developments. The progress we’re making in our world today is nothing short of inspiring… although I still can’t wrap my head around Google and their new multi-dimensional quantum computer!
With all these developments, I think it’d be easy to argue that progress is not slowing down as we hear so often in the media, but it may, in fact, be accelerating. As we should expect.
History is one long story of humanity solving one huge problem after another—problems that initially seemed unsolvable. As it goes, we’re seeing some of these problems being solved right before our eyes.
And as good as solving problems is for humanity in general, this innate human desire for more and better is what will ultimately drive the markets over the decades ahead, just as it always has. This is why I believe we should focus on the long-term catalysts rather than just the breaking news of the day.
Again, I hope you find this useful as you consider your approach and perspective as we move into the new year! And, as always, please feel free to reach out to us if there’s any way at all we can be of service.
Look for the annual subscription sale this week.
Thank you,
-RevShark
In that vein, our first post for the new year is a recap of 2024 where we’ll offer a few thoughts on maintaining the perspective required to be a successful investor and the current state of the US consumer, share some notes on investing in 2024, and finish with some reasons for big-picture optimism as we look to the future.
I hope you find this helpful as you work towards achieving your financial goals.
First, the Returns…
1. After big returns in 2023, 2024 saw another remarkable year for the C- and S-Funds: Here are the 2024 returns as of December 31, 2024:
G Fund: +4.40%
F Fund: +1.33%
C Fund: +24.96%
S Fund: +16.93%
I Fund: +4.27%
The State of the Consumer:
2. Growth In Household Net Worth Has Been Astounding: Collectively, the American consumer is in the best financial shape they’ve ever been in, with household net worth (assets less liabilities) reaching a record $160 trillion at the end of the 3rd quarter of 2024. Even more staggeringly, just since the start of 2020, household assets have increased by $53 trillion while liabilities have increased by just $4 trillion. That means that for every $1 of debt households have taken on, assets have increased by an incredible $13! As amazing as this is, the financial media simply isn’t covering this.
3. The Economy Is Rolling (And That’s Been Good For Consumers): The U.S. Gross Domestic Product is estimated to have increased by a real rate (exceeding inflation) of 2.7% during 2024. This growth was largely due to low unemployment, wages outpacing inflation, and consumers spending.
4. Good News About Interest Rates And Inflation: Interest rates and inflation impact nearly every consumer, and there was good news on both fronts in 2024. The Fed lowered rates by a full percentage point during the latter half of the year, while notably, most other central banks were also cutting rates. This was all possible because inflation was relatively stable throughout the year while slowly closing in on the Fed’s 2% target. That said, persistent strength in the economy has tempered expectations for further cuts, which was a driving factor behind the F-Funds struggles in Q4.
The State Of Companies:
5. Corporate America Is Doing Quite Well: Analysts expect that 2024 earnings growth for the S&P 500 will be nearly 10%. Moreover, calls for 4th quarter year-over-year earnings growth are 11.9%, which would be the highest earnings growth reported by the index since 2021 when we were still recovering from the pandemic.
6. Worker Productivity Is Booming: Admittedly, this may seem like a boring note, but worker productivity has far-reaching implications as it’s critical to both the company earnings we just noted and overall economic growth. According to the Wall Street Journal, we’ve had five consecutive quarters in which productivity has increased by 2% or more. Obviously, this is good for companies (which is good for the economy and stock market), but more interestingly, the WSJ also noted that raising worker productivity growth by just 0.5% could mean our debt-to-GDP ratio would expand to a much more manageable 108% over the next decade rather than the currently expected 116%. For those who are worried about our national debt, this increase in worker productivity should be a cause for optimism.
The State Of Investing:
7. 57 New All-Time Highs: The biggest news in investing this past year has to be the fact that the C-Fund closed at new all-time highs 57 times in 2024! With about 250 trading days per year, this means about 22% of all trading days ended at an all-time high—that’s an average of more than one new all-time high per week. That’s impressive for a year in which exactly zero “experts” came close to predicting where we’d end up. So much for forecasting. And for “experts.”
8. The Tough Road For Bond Investors Continues: While the F-Fund did eke out a positive return, the real return (after inflation) was paltry. If that’s not enough to be dour about, it’s notable that bonds remain in a historic 52-month drawdown. This is the longest drawdown in half a century, with the next longest streak being a comparatively short 16 months. It will be interesting to see how long this lasts.
Some Reasons for Optimism:
9. Extreme Poverty Is Slowly Being Eradicated: Over the last eight years, about 10% of school-age children (or about 200 million children!) gained access to water, sanitation, and hygiene services at school for the first time. That's a staggering figure and is something we should all be excited about. Most importantly, because we want all children to have everything they need to thrive, but also because it is evidence of our continued progress against poverty. Beyond these needs being met, electricity (inevitably followed by internet access) will soon be on its way as well, as it's estimated that Africa will turn the lights on for another 300 million Africans by 2030. The potential here is beyond incredible.
10. A Few More Things You Probably Didn’t Hear About On The News: “It was a mind-boggling year for material science. Artificial intelligence helped identify a solid-state electrolyte that could slash lithium use in batteries by 70%, and an Apple supplier announced a battery material that can deliver around 100 times better energy density. The world’s first functioning graphene-based semiconductor was unveiled (the long-awaited ‘wonder material’ may finally be coming of age!) and a team at Berkeley invented a fluffy yellow powder that could be a game changer for removing carbon from the atmosphere.” The future is indeed bright, my friends.
As encouraging as those last items are, we didn’t even touch on the possibilities arising from advances in artificial intelligence, developments in nuclear and other clean energy, desalination, and countless other innovations and developments. The progress we’re making in our world today is nothing short of inspiring… although I still can’t wrap my head around Google and their new multi-dimensional quantum computer!
With all these developments, I think it’d be easy to argue that progress is not slowing down as we hear so often in the media, but it may, in fact, be accelerating. As we should expect.
History is one long story of humanity solving one huge problem after another—problems that initially seemed unsolvable. As it goes, we’re seeing some of these problems being solved right before our eyes.
And as good as solving problems is for humanity in general, this innate human desire for more and better is what will ultimately drive the markets over the decades ahead, just as it always has. This is why I believe we should focus on the long-term catalysts rather than just the breaking news of the day.
Again, I hope you find this useful as you consider your approach and perspective as we move into the new year! And, as always, please feel free to reach out to us if there’s any way at all we can be of service.
Look for the annual subscription sale this week.
Thank you,
-RevShark
