Investment Commentary: Q4 2024

2024 was a big year macro-economically and geopolitically. Many central banks started their easing cycles after almost two years of hiking interest rates to levels not seen since before the Great Financial Crisis. Nearly two-thirds of the world's population participated in elections; the outcomes are expected to impact the global economy significantly. While December was a weak month for equities, markets overall generated strong returns throughout 2024. Over the fourth quarter, The Community Foundation’s Corporate Commingled Fund generated a net return of 1.0%, which was 1.0% higher than its Policy Benchmark. This brings the entire year’s performance to 10.8%, underperforming the Policy Benchmark by 1.3%.

The fourth quarter demonstrated continued strong U.S. equity performance, with the S&P 500 Index ending the year on another high note, up 25%. Following an S&P 500 Index return of 26.3% in 2023, this period highlights a streak of dominance for U.S. large-cap equities — the S&P 500 Index has not had consecutive annual returns exceeding 20% since 1995-1999. Performance in the fourth quarter across markets was primarily influenced by the Federal Reserve’s interest rate policy and the results of the U.S. Presidential election. The U.S. equity market rallied as uncertainty was swiftly resolved on Election Day. Investor confidence was further bolstered by the Trump administration’s proposals for pro-business policies, which included lower corporate tax rates and deregulation. The robust economic data and additional Fed rate cuts further propelled U.S. equities to post another strong year of returns. Conversely, non-U.S. equities struggled as investors grappled with the potential implications of Trump’s proposed tariffs and a strengthening U.S. dollar. Fixed income yields were volatile throughout the quarter as the market reacted to each rate cut, shifting inflation expectations and setting the stage for a more hawkish outlook for 2025.

The incoming Republican administration is expected to prioritize tax cuts and deregulation as a part of a pro-growth and U.S.-first agenda. This agenda will likely lead to dispersion between perceived “winners” and “losers” in the investment landscape, with specific sectors and companies benefiting more than others. The market is also expressing increased concerns about potential inflationary policies, such as tariffs. In recent months, inflation data has remained stubbornly above the Fed’s 2% target. This has caused the market to reconsider the Fed’s course on interest rates, although longer-term inflation expectations have not moved significantly. The CFGNH cash and fixed income allocation is structured for long-term stability to ensure sufficient flexibility to meet ongoing portfolio needs.

As always, we aim for the best possible prospects for success across a wide range of potential economic scenarios. We look forward to speaking with you soon.

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