2024 Market and Sector Performance Review

The dust is beginning to settle on 2024, and it’s time to take snapshots of market and sector performance and assess the situation as it stands. At the close of business on Dec 31st, the S&P 500 Index had gained 23.31%, slightly behind 2023’s yearly gain of 24.23%, marking an impressive rally over the past 24 months. The larger-cap and more focused S&P 100 Index returned 29.25% for 2024, nearly matching the 2023 return of 30.83%. On the more technology-laden NASDAQ, returns of 28.64% were almost in line with those seen in the S&P 100 Index, while the mid and small-cap Russell 2000 Index gained only 9.05%, significantly underperforming its 2023 performance of 17.39%. In Canada, the S&P/TSX Composite Index rose 17.99% in 2024, compared to the 2023 return of only 8.12%, while the larger-cap S&P/TSX 60 Index gained 17.19% in 2024, versus 8.21% in 2023. In Canada, mid-cap stocks fared the best, with the S&P/TSX Canadian Midcap Index producing gains of 21.41% in 2024, recovering from an underperformance of -7.68% in 2023. In the bond market, the CBOE 5, 10, and 30-year bonds caught a significant tailwind from falling rates, posting gains of 14.06%, 18.29%, and 19.08% respectively, after poor performance in 2023 (-4.00%, -0.34%, and 1.11%).

Sector performance favored technology, financial services, and higher-beta sectors like leisure and aerospace, in contrast to the lower-beta sectors typically found within healthcare and consumer staples. It was a risk-on year. Using SIA Equal Weight Indexes, a clear picture of return rates emerges. SIA Telecommunications Services saw an eye-popping gain of 37.26%, while SIA Financials gained 28.28%, SIA Insurance rose 29.46%, and SIA Banking increased by 23.44%. Overall, various technology sectors took center stage, with SIA Computer Software gaining 27.95%, SIA Internet up 20.12%, and SIA Computer Hardware increasing 19.79%. Utilities were another strong performer, with the equal-weight index up 19.46%. The only equal-weight sectors to post negative returns were SIA Chemicals (-3.18%), SIA Consumer Durables (-2.41%), and SIA Drugs (-2.42%). Some notable sectors that didn’t perform as expected were SIA Electronics and Semiconductors, which gained only 3.01%, underscoring the narrow rally in that sector, with only a few names carrying the bulk of the returns. Another sector with significant attention but little broad based rally was SIA Mines and Metals, which closed the year with a return of only 6.66%. When summed up, it’s striking just how narrow the rally in 2024 really was, with two dominant themes: the extremely narrow high-tech sector led by the “Magnificent Seven” and the rally driven by Financials on the back of rate cuts initiated by central banks around the world. Notably, while SIA Automotive Equal Weight was the worst performer for 2024 at -7.14%, it has been one of the fastest relative strength gainers in the past quarter, with names like Tesla at the top of the SIA matrix reports, making it a sector to watch as we move into 2025.

In the SIA Sector Scope, we can begin 2025 with a clear snapshot of market and sector risk, as measured by both Bullish Percent and Relative Strength. The sectors with the highest relative strength currently mirror those that were the best performers in 2024: Computer Software, Construction, Conglomerates, Insurance, Telecommunications, Aerospace, and Banking in its various forms. In the low relative strength camp, we find Chemicals, Health, Foods, Drugs, Specialty Retail, and Staples. One sector that stands out as different from 2024 is SIA Metals and Mining, which is now decidedly Unfavored as we enter 2025. Although there has been some speculation about Energy, particularly with an upcoming cold snap, SIA Energy remains Unfavored. Those seeking exposure might find it advantageous to look for individual pockets of strength rather than relying on broad sector-based investments. Overall, the bell curve is shifting toward the left, indicating that more stocks are moving to point-and-figure sell signals, with only those sectors that are capitalized now moving to the right side of the ledger. These early point-and-figure bullish percent reversals have emerged in AUTO, DRUG, AERO, FINA, and ELEC, with three of these sectors currently Unfavored in the SIA Sector Matrix Report. Only AERO and FINA are currently Favored and show positive Bullish Percent sector charts. This raises the question: will AUTO, DRUG, and ELEC turn a corner within the SIA Sector Report in 2025? As noted above, one sector that is close to pushing out of the SIA Unfavored zone is AUTO, making it one sector for skilled SIA practitioners to keep a close eye on.