Contributors
Alan Wynne
Global Investment Strategist
Market update
If you thought the Federal Reserve (Fed) was moving to the backburner for markets, think again.
Stocks sold off sharply this week after the Fed cut their policy rate by 25 basis points to 4.25 to 4.5%. That was expected. What was more surprising was that the Summary of Economic Projections (SEP) showed higher forecasts for growth, inflation and future policy rates from Fed board members.
In response, U.S. equities were lower, bond yields were higher and the dollar was stronger. The S&P 500 is down -2.4% on the week, the 10-year (4.55%) crossed the 4.5% mark for the first time since May and the Bloomberg dollar index is at the highest level in two years.
Despite the jolt, we think the more hawkish turn in tone reflects the resilience of the U.S. economy. Slower rate cuts reflect the uncertainty that still remains as stronger growth entails stickier inflation and a labor market that has cooled considerably but has not cracked.
To add more turmoil to the last full week before the holiday season, the U.S. government is facing a shutdown after the Republican-led House of Representatives rejected a temporary funding plan backed by President-elect Donald Trump.
Below, we break down what you need to know.
Spotlight
Government shutdown 101. While Washington may be in turmoil as politicians haggle on how to fund the government, history shows that the financial and economic impact tends to be very short lived. However, this episode is an example of how difficult it could be to implement President Trump’s agenda given very slim margins for Republicans in Congress and competing interests within the GOP.
What happened? On Wednesday, President-elect Trump and Elon Musk opposed the House of Representative’s proposal to extend government funding, which effectively forced House Speaker Mike Johnson to start from scratch. A new bill was drafted, which would keep the government funded through March 2025, but notably included language to suspend the debt ceiling until January 30, 2027. The bill went to the House but failed by a vote of 235 (against) to 174 (for), with 38 Republicans voting against it.
If the parties can’t find a new solution by tonight (December 20), the government will shut down until funding can be restored. That would mean that most nonessential federal operations cease and many workers would be furloughed or work without pay until Congress and the President can agree on a spending bill.
What does a government shutdown mean for markets? The shutdown itself is likely to have a very limited impact on markets and the economy just like other idiosyncratic, short-lived events. The Congressional Budget Office (CBO) studied the economic effect of the 2018-2019 government shutdown (which, at five weeks long, was the longest shutdown on record). According to the CBO, each week the shutdown lasted shaved 10 to 15 basis points from the GDP.
Importantly, once the shutdown ended, economic output almost fully rebounded as workers and operations came back online. Markets understand that these shutdowns are temporary and as such tend to look through them.
We analyzed the previous government shutdowns since 2010 (there have been three) and their effect on markets. All things considered, markets didn’t move much. On average, the S&P actually gained 4.7% while the government was in limbo – including a 10.3% return during the 35-day 2019 shutdown. Across other asset classes, bond yields were marginally lower on average, and the dollar tended to decline.
What’s more, when we extend our timeline back to 1977, we can increase our sample size to 20 government shutdowns. The result for markets is similar. Stocks and core bonds showed no movement on average, treasury yields tended to move marginally higher and the dollar declined less than half a percent.
Markets have looked past government shutdowns
Change during government shutdowns since 2010, Change during government shutdowns since 1977
There are two tables showing the average and median for the S&P 500, 10-year yield, and the USD during government shutdowns historically.
Change during government shutdowns since 2010
Since 2010, the S&P 500 average was 4.7% and median was 3.1%, the 10-year average was -2.0bps and median was -2.1bps, and the USD average was -0.7% and median was -0.7%.
Change during government shutdowns since 1977
Since 1977, the S&P 500 average was 0.0% and median was 0.0%, the 10-year average was 3.8bps and median was -0.5bps, and the USD average was -0.3% and median was -0.2%.
Source: History, Art & Archives, U.S. House of Representatives, Bloomberg Finance L.P. Analysis as of December 19, 2024. Data as of 2019.
What’s our take? Government shutdowns are a more frequent occurrence than anyone would like. Markets tend to realize that the impact is temporary and we think this time will be no different. Even so, this episode is indicative of the challenge that Washington faces next year in important policy priorities like extending the Tax Cuts and Jobs Act. The GOP majority in the House is razor thin (220 to 215), and it seems like President-elect Trump and his cohort of advisors (like Elon Musk) will have an outsized influence over Congress. Compromise may be very difficult to achieve given competing priorities not only across parties, but within them.
That said, we wouldn’t take a different approach to managing portfolios. Sticking to long-term strategic allocations is the best way to achieve investment goals. In 2025, we think U.S. equities can continue to grind higher as earnings grow. Right now, we are focused on building more resilient portfolios with assets that provide differentiated sources of income and lower correlations to traditional asset classes.
No matter what surprises 2025 has in store, your J.P. Morgan advisor is here to help guide you and your family. Happy Holidays.
Bonus: The year that was. 2024 was another banner year for U.S. equities. For the first time since the late 1990’s the S&P 500 has gained over 20% two years in a row. What does 2024 have in common with some of the other great years in market history? The Federal Reserve was able to lower rates outside of an economic recession. Other examples of 25% to 30% annual returns: 1985, 1989, 1995, 1998 and 2019.
As we wrap up the year with our final Top Market Takeaways of 2024, we leave you with biggest events of the last 12 months.
2024 in review
S&P 500 index 2024 price return, percent, 2024 10-year U.S. Treasury yield, percent
This shows two line charts: one for the S&P 500 index 2024 price return and another for the 2024 10-year U.S. Treasury yield. Both plot 40 significant events that happened during the year. Here is the text with the specified 10-year U.S. Treasury yields added:
- On 1/10/2024, the US SEC approves eleven spot Bitcoin ETFs in a landmark decision (markets), with an S&P 500 Index price return of 0.3%, and a 10-year U.S. Treasury yield of 4.0283%.
- On 1/19/2024, the S&P 500 hits its first all-time high in over two years (markets), with an S&P 500 Index price return of 1.5%, and a 10-year U.S. Treasury yield of 4.1226%.
- On 1/29/2024, Chinese property giant Evergrande, holding over $300B in debt, is ordered to liquidate by a Hong Kong court (markets), with an S&P 500 Index price return of 3.3%, and a 10-year U.S. Treasury yield of 4.074%.
- On 2/11/2024, Kansas City Chiefs win their second consecutive Super Bowl (Nature, Culture & Technology), with an S&P 500 Index price return of 5.3%, and a 10-year U.S. Treasury yield of 4.1754%. On 2/15/2024, the United Kingdom enters a technical recession (economy), with an S&P 500 Index price return of 5.4%, and a 10-year U.S. Treasury yield of 4.23%.
- On 2/22/2024, Nvidia adds nearly $280B to its market value, the most in a day for a company ever (markets), with an S&P 500 Index price return of 6.5%, and a 10-year U.S. Treasury yield of 4.3207%.
- On 2/22/2024, the Nikkei average, Japan's equity benchmark, reaches its highest-ever level for the first time since 1989 (markets), with an S&P 500 Index price return of 6.5%, and a 10-year U.S. Treasury yield of 4.3207%.
- On 3/10/2024, the 96th Academy Awards sees Oppenheimer win seven Oscars, including Best Picture (Nature, Culture & Technology), with an S&P 500 Index price return of 7.2%, and a 10-year U.S. Treasury yield of 4.0749%.
- On 3/13/2024, Chinese-based ByteDance, the owner of TikTok, is forced to sell the social media platform or face a ban by the US House of Representatives (Nature, Culture & Technology), with an S&P 500 Index price return of 8.1%, and a 10-year U.S. Treasury yield of 4.1899%.
- On 3/21/2024, the Swiss National Bank cuts interest rates, the first developed market central bank to do so this cycle (economy), with an S&P 500 Index price return of 9.6%, and a 10-year U.S. Treasury yield of 4.2669%.
- On 4/5/2024, Brent reaches a peak of $91 as fallout from World Central Kitchen deaths raise Middle East tensions (markets), with an S&P 500 Index price return of 8.9%, and a 10-year U.S. Treasury yield of 4.4016%.
- On 4/20/2024, the US House passes a bipartisan $95 billion foreign aid package for Ukraine, Israel, and Taiwan (Politics & Geopolitics), with an S&P 500 Index price return of 4.2%, and a 10-year U.S. Treasury yield of 4.6207%.
- On 4/23/2024, the US FTC votes to ban nearly all employment agreements that prevent workers from joining competing businesses (economy), with an S&P 500 Index price return of 6.3%, and a 10-year U.S. Treasury yield of 4.6004%.
- On 5/15/2024, the April CPI report shows US inflation cooled for the first time this year (economy), with an S&P 500 Index price return of 10.9%, and a 10-year U.S. Treasury yield of 4.34%.
- On 5/19/2024, Manchester City wins their fourth consecutive Premier League title (Nature, Culture & Technology), with an S&P 500 Index price return of 10.9%, and a 10-year U.S. Treasury yield of 4.4198%.
- On 5/19/2024, the President and Foreign Minister of Iran are killed in a helicopter crash (Politics & Geopolitics), with an S&P 500 Index price return of 10.9%, and a 10-year U.S. Treasury yield of 4.4198%.
- On 5/20/2024, the copper price hits a record above $11,000 as fears of a shortage grow (markets), with an S&P 500 Index price return of 10.9%, and a 10-year U.S. Treasury yield of 4.4433%.
- On 6/2/2024, Mexico elects Claudia Sheinbaum as its first woman president (Politics & Geopolitics), with an S&P 500 Index price return of 10.4%, and a 10-year U.S. Treasury yield of 4.2227%.
- On 6/4/2024, results announced in the 2024 Indian general election show BJP unexpectedly loses outright majority (Politics & Geopolitics), with an S&P 500 Index price return of 10.6%, and a 10-year U.S. Treasury yield of 4.1829%.
- On 6/10/2024, French President Emmanuel Macron calls for snap elections (Politics & Geopolitics), with an S&P 500 Index price return of 12%, and a 10-year U.S. Treasury yield of 4.2389%.
- On 6/18/2024, Nvidia passes Microsoft as the most valuable public company (markets), with an S&P 500 Index price return of 14.3%, and a 10-year U.S. Treasury yield of 4.1939%.
- On 7/14/2024, Carlos Alcaraz wins Wimbledon by beating Novak Djokovic, now owning 4 Slam titles at only 21 years old (Nature, Culture & Technology), with an S&P 500 Index price return of 16.6%, and a 10-year U.S. Treasury yield of 4.0296%.
- On 7/21/2024, Joe Biden announced his withdrawal from the 2024 United States presidential election (Politics & Geopolitics), with an S&P 500 Index price return of 14.7%, and a 10-year U.S. Treasury yield of 3.7904%.
- On 7/26/2024, Paris hosts the Olympic Games, marking the biggest event ever organized in France (Nature, Culture & Technology), with an S&P 500 Index price return of 13.9%, and a 10-year U.S. Treasury yield of 3.7884%.
- On 7/31/2024, the Bank of Japan raised interest rates for the second time in 2024, underscoring determination to normalize monetary policy (economy), with an S&P 500 Index price return of 15%, and a 10-year U.S. Treasury yield of 3.7038%.
- On 8/2/2024, the Sahm rule was triggered but a recession did not follow (economy), with an S&P 500 Index price return of 11.8%, and a 10-year U.S. Treasury yield of 3.728%.
- On 8/5/2024, the yen carry trade begins unwinding; the Nikkei 225 index in Japan fell 12% while the VIX briefly reached highs since COVID-19 (markets), with an S&P 500 Index price return of 8.8%, and a 10-year U.S. Treasury yield of 4.0726%.
- On 9/18/2024, the Federal Reserve announced its first interest rate cut since the pandemic recovery (economy), with an S&P 500 Index price return of 17%, and a 10-year U.S. Treasury yield of 4.0122%.
- On 9/24/2024, the Chinese government announces a major stimulus package (economy), with an S&P 500 Index price return of 19%, and a 10-year U.S. Treasury yield of 4.2708%.
- On 10/9/2024, Hurricane Helene and Milton hit Florida's Gulf Coast, part of the deadliest hurricane season in nearly two decades (Nature, Culture & Technology), with an S&P 500 Index price return of 20%, and a 10-year U.S. Treasury yield of 4.4394%.
- On 10/16/2024, Israel Defense Forces troops kill Hamas leader Yahya Sinwar (Politics & Geopolitics), with an S&P 500 Index price return of 20.9%, and a 10-year U.S. Treasury yield of 4.41%.
- On 11/5/2024, the 2024 US Presidential Election concluded with Donald Trump becoming only the second US president to serve non-consecutive terms (Politics & Geopolitics), with an S&P 500 Index price return of 19.9%, and a 10-year U.S. Treasury yield of 4.2245%.
- On 11/15/2024, Netflix claims the exhibition fight between YouTuber Jake Paul and boxing great Mike Tyson was the most-streamed sporting event ever, attracting 108 million live viewers globally (Nature, Culture & Technology), with an S&P 500 Index price return of 21.5%, and a 10-year U.S. Treasury yield of 4.18%.
- On 11/20/2024, Google Cloud launches AI agent partner program (markets), with an S&P 500 Index price return of 22.3%, and a 10-year U.S. Treasury yield of 4.18%.
- On 12/3/2024, BlackRock buys HPS Investment Partners for $12 billion, expanding in private credit (markets), with an S&P 500 Index price return of 24.5%, and a 10-year U.S. Treasury yield of 4.3632%.
- On 12/4/2024, the S&P 500 closed at its 56th all-time high of 2024, which is the fifth-best showing since 1929 (markets), with an S&P 500 Index price return of 25%, and a 10-year U.S. Treasury yield of 4.3632%.
- On 12/4/2024, Bitcoin price hits $100,000 for the first time ever (markets), with an S&P 500 Index price return of 25%, and a 10-year U.S. Treasury yield of 4.3632%.
- On 12/16/2024, the German government collapsed as Chancellor Olaf Scholz lost a confidence vote in Parliament (Politics & Geopolitics), with an S&P 500 Index price return of 24.9%, and a 10-year U.S. Treasury yield of 4.3632%.
- On 12/18/2024, the Federal Reserve made its third consecutive rate cut, following which Chairman Jerome Powell said that the Fed may not slash rates in 2025 as much as had initially been projected (economy), with an S&P 500 Index price return of 21.6%, and a 10-year U.S. Treasury yield of 4.3632%.
- On 12/18/2024, the Dow Jones Industrial Average declines for 10 straight days marking its longest losing streak since 1974 (markets), with an S&P 500 Index price return of 21.6%, and a 10-year U.S. Treasury yield of 4.3632%.
Source: Bloomberg L.P. Data as of December 19, 2024. Past performance is no guarantee of future results. It is not possible to invest in an index.
Events
This table lists 40 important events that took place during the first six months of 2024 in chronological order. The events are as follows:
- The US SEC approves eleven spot Bitcoin ETFs in a landmark decision
- S&P500 hits first all-time high in over two years
- Chinese property giant Evergrande (holding over $300B in debt) ordered to liquidate by Hong Kong court
- Kansas City Cheifs win their second consecutive Superbowl
- The United Kingdom enters a technical recession
- Nvidia adds nearly $280B to its market value, the most in a day for a company ever
- The Nikkei average, Japan's equity benchmark, reaches its highest-ever level for the first time since 1989
- 96th Academy Awards, Oppenheimer wins seven Oscars, including Best Picture
- Chinese-based ByteDance, the owner of TikTok, forced to sell the social media platform or face a ban by the US House of Representatives
- The Swiss National Bank cuts interest rates - the first developed market central bank to do so this cycle
- Brent reaches a peak of $91 as fallout from World Central Kitchen deaths raise Middle East tensions
- US House passes a bipartisan $95 billion foreign aid package for Ukraine, Israel and Taiwan
- The US FTC votes to ban nearly all employment agreements that prevent workers from joining competing businesses
- April CPI report shows US inflation cooled for the first time this year
- Manchester City wins their fourth consecutive Premier League title
- President and Foreign minister of Iran killed in a helicopter crash
- Copper price hits record above $11,000 as fears of shortage grow
- Mexico elects Claudia Sheinbaum as its first woman president
- Results announced in the 2024 Indian general election - BJP unexpectedly loses outright majority
- Nvidia passes Microsoft as most valuable public company
- French President Emmanuel Macron calls for snap elections
- Carlos Alcaraz wins Wimbledon by beating Novak Djokovic, now owning 4 Slam titles at only 21 years old
- Joe Biden announced his withdrawal from the 2024 United States presidential election
- Paris hosts the Olympic Games, marking the biggest event ever organized in France
- The Bank of Japan raised interest rates for the second time in 2024, underscording determination to normalize monetary policy
- The Sahm rule was triggered but a recession did not follow
- The yen carry trade begins unwinding; the Nikkei 225 index in Japan fell 12% while the VIX briefly reached highs since COVID-19
- The Federal Reserve announced its first interest rate cut since the pandemic recovery
- The Chinese government announces a major stimulus package
- Hurricane Helene and Milton hit Florida's Gulf Coast, part of the deadliest hurricane season in nearly two decades
- Israel Defense Forces troops kill Hamas leader Yahya Sinwar
- The 2024 US Presidential Election concluded with Donald Trump becoming only the second US president to serve non-consecutive terms
- Netflix claims the exhibition fight between YouTuber Jake Paul and boxing great Mike Tyson was the most-streamed sporting event ever, attracting 108 million live viewers globally
- Google Cloud launches AI agent partner program
- BlackRock buys HPS Investment Partners for $12 billion, expanding in private credit
- The S&P 500 closed at its 56th all-time high of 2024, which is the fifth-best showing since 1929
- Bitcoin price hits $100,000 for the first time ever
- The German government collapsed as Chancellor Olaf Scholz lost a confidence vote in Parliament
- The Federal Reserve made its third consecutive rate cut, following which Chairman Jerome Powell's said that the Fed may not slash rates in 2025 as much as had initially been projected
- Dow Jones Industrial Average declines for 10 straight days marking its longest losing streak since 1974
All market and economic data as of 12/20/2024 are sourced from Bloomberg Finance L.P. and FactSet unless otherwise stated.
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Index definitions:
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The Magnificent 7 Index is an equal-dollar weighted equity benchmark consisting of a fixed basket of 7 widely-traded companies (Microsoft, Apple, Nvidia, Alphabet, Amazon, Meta, Tesla) classified in the United States and representing the Communications, Consumer Discretionary and Technology sectors as defined by Bloomberg Industry Classification System (BICS).
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GENERAL RISKS & CONSIDERATIONS. Any views, strategies or products discussed in this material may not be appropriate for all individuals and are subject to risks. Investors may get back less than they invested, and past performance is not a reliable indicator of future results. Asset allocation/diversification does not guarantee a profit or protect against loss. Nothing in this material should be relied upon in isolation for the purpose of making an investment decision. You are urged to consider carefully whether the services, products, asset classes (e.g. equities, fixed income, alternative investments, commodities, etc.) or strategies discussed are suitable to your needs. You must also consider the objectives, risks, charges, and expenses associated with an investment service, product or strategy prior to making an investment decision. For this and more complete information, including discussion of your goals/situation, contact your J.P. Morgan team.
NON-RELIANCE. Certain information contained in this material is believed to be reliable; however, JPM does not represent or warrant its accuracy, reliability or completeness, or accept any liability for any loss or damage (whether direct or indirect) arising out of the use of all or any part of this material. No representation or warranty should be made with regard to any computations, graphs, tables, diagrams or commentary in this material, which are provided for illustration/reference purposes only. The views, opinions, estimates and strategies expressed in this material constitute our judgment based on current market conditions and are subject to change without notice. JPM assumes no duty to update any information in this material in the event that such information changes. Views, opinions, estimates and strategies expressed herein may differ from those expressed by other areas of JPM, views expressed for other purposes or in other contexts, and this material should not be regarded as a research report. Any projected results and risks are based solely on hypothetical examples cited, and actual results and risks will vary depending on specific circumstances. Forward-looking statements should not be considered as guarantees or predictions of future events.
Nothing in this document shall be construed as giving rise to any duty of care owed to, or advisory relationship with, you or any third party. Nothing in this document shall be regarded as an offer, solicitation, recommendation or advice (whether financial, accounting, legal, tax or other) given by J.P. Morgan and/or its officers or employees, irrespective of whether or not such communication was given at your request. J.P. Morgan and its affiliates and employees do not provide tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any financial transactions.
LEGAL ENTITY, BRAND & REGULATORY INFORMATION
In the United States, bank deposit accounts and related services, such as checking, savings and bank lending, are offered by JPMorgan Chase Bank, N.A. Member FDIC.
J.P. Morgan Wealth Management is a business of JPMorgan Chase & Co., which offers investment products and services through J.P. Morgan Securities LLC (JPMS), a registered broker-dealer and investment adviser, member FINRA and SIPC. Insurance products are made available through Chase Insurance Agency, Inc. (CIA), a licensed insurance agency, doing business as Chase Insurance Agency Services, Inc. in Florida. Certain custody and other services are provided by JPMorgan Chase Bank, N.A. (JPMCB). JPMS, CIA and JPMCB are affiliated companies under the common control of JPMorgan Chase & Co. Products not available in all states.
Bank deposit accounts and related services, such as checking, savings and bank lending, are offered by JPMorgan Chase Bank, N.A. Member FDIC.
This document may provide information about the brokerage and investment advisory services provided by J.P. Morgan Securities LLC (“JPMS”). The agreements entered into with JPMS, and corresponding disclosures provided with respect to the different products and services provided by JPMS (including our Form ADV disclosure brochure, if and when applicable), contain important information about the capacity in which we will be acting. You should read them all carefully. We encourage clients to speak to their JPMS representative regarding the nature of the products and services and to ask any questions they may have about the difference between brokerage and investment advisory services, including the obligation to disclose conflicts of interests and to act in the best interests of our clients.
J.P. Morgan may hold a position for itself or our other clients which may not be consistent with the information, opinions, estimates, investment strategies or views expressed in this document. JPMorgan Chase & Co. or its affiliates may hold a position or act as market maker in the financial instruments of any issuer discussed herein or act as an underwriter, placement agent, advisor or lender to such issuer.
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To learn more about J. P. Morgan’s investment business, including our accounts, products and services, as well as our relationship with you, please review our J.P. Morgan Securities LLC Form CRS and Guide to Investment Services and Brokerage Products.
This website is for informational purposes only, and not an offer, recommendation or solicitation of any product, strategy service or transaction. Any views, strategies or products discussed on this site may not be appropriate or suitable for all individuals and are subject to risks. Prior to making any investment or financial decisions, an investor should seek individualized advice from a personal financial, legal, tax and other professional advisors that take into account all of the particular facts and circumstances of an investor's own situation.
This website provides information about the brokerage and investment advisory services provided by J.P. Morgan Securities LLC ("JPMS"). When JPMS acts as a broker-dealer, a client's relationship with us and our duties to the client will be different in some important ways than a client's relationship with us and our duties to the client when we are acting as an investment advisor. A client should carefully read the agreements and disclosures received (including our Form ADV disclosure brochure, if and when applicable) in connection with our provision of services for important information about the capacity in which we will be acting.
INVESTMENT AND INSURANCE PRODUCTS ARE: • NOT FDIC INSURED • NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY • NOT A DEPOSIT OR OTHER OBLIGATION OF, OR GUARANTEED BY, JPMORGAN CHASE BANK, N.A. OR ANY OF ITS AFFILIATES • SUBJECT TO INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF THE PRINCIPAL AMOUNT INVESTED
J.P. Morgan Wealth Management is a business of JPMorgan Chase & Co., which offers investment products and services through J.P. Morgan Securities LLC (JPMS), a registered broker-dealer and investment adviser, member FINRA and SIPC Insurance products are made available through Chase Insurance Agency, Inc. (CIA), a licensed insurance agency, doing business as Chase Insurance Agency Services, Inc. in Florida. Certain custody and other services are provided by JPMorgan Chase Bank, N.A. (JPMCB). JPMS, CIA and JPMCB are affiliated companies under the common control of JPMorgan Chase & Co. Products not available in all states.
Please read additional Important Information in conjunction with these pages.