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The Master’s Minute – 2024 Stock Market in Context – Q1 Blog Series Part II

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Last week, Garry introduced our blog series reflecting on the 2024 investment markets. This week, we’re diving deeper into the stock market’s performance, highlighting key trends and insights.

The 2024 Stock Market: Overview 

2024 marked another strong year of positive returns for investors. Following the downturn in 2022, patience was rewarded as both 2023 and 2024 delivered substantial gains.

In 2024, several stock market indexes achieved outsized returns: the S&P 500 rose approximately 24%, while the NASDAQ increased nearly 30%.

The Magnificent 7 Upsides 

The S&P 500’s returns were driven largely by seven key technology companies—Microsoft, Amazon, Meta (formerly Facebook), Apple, Alphabet (Google), Nvidia, and Tesla—collectively known as “The Magnificent 7.”

These companies outperformed the broader index, significantly boosting its performance.

Without these seven stocks, the remaining 493 companies in the S&P 500 achieved an average return of just over 10%, as illustrated in the accompanying JP Morgan chart.

performance of Magnificent 7 with earning dynamics from JP Morgan

The Magnificent 7: Risk Awareness 

However, the concentrated performance of “The Magnificent 7” comes with risks. In 2022, these companies lost about 40% of their value, compared to an average decline of just 8% for the rest of the S&P 500.

This highlights the potential downside of heavy reliance on a small group of stocks!

Takeaway: The Importance of a Risk Aware, Diversified Approach to the Stock Market 

At Master’s, our Investment Review Committee (IRC) focuses on creating portfolios with systematic, diversified strategies to manage risk. While we maintained some exposure to “The Magnificent 7,” our allocations were far lower than those of the S&P 500, ensuring a more balanced approach.

Next week, Lyle Hershey will delve deeper into our investment strategies, focusing on our “factor-based” investing approach. Be sure to check back for valuable insights into how we diversify portfolios to manage risk and optimize returns.

If you have any questions, or would like to discuss your portfolio and allocations, please contact us today. Thank you for your trust in Master’s for your financial planning and asset management needs. It is our privilege to serve you.