The stock market was volatile in November as the Federal Reserve managed investor expectations for a December rate cut. The volatility started after the Fed’s late-October meeting, when Chair Powell said a December rate cut was “not a foregone conclusion.” Sentiment then shifted again late in the month as comments from influential Fed members, rising unemployment, and favorable inflation data pushed the odds of a December cut back above 80%.

October saw markets navigate a complex mix of political and economic developments as the Federal Reserve cut rates by 0.25% amid the second-longest government shutdown in US history. The data blackout caused by the shutdown forced policymakers to act without fresh economic indicators, with Chair Powell citing rising employment risks as the primary concern. Despite political gridlock and mixed economic signals, stocks closed the month near all-time highs after rebounding from early credit worries tied to regional banks and renewed US–China trade tensions. Encouraging progress at the late-October Trump–Xi summit and strong corporate earnings helped restore confidence. As investors look to year-end, sentiment remains cautiously optimistic—supported by the Fed’s easing stance, AI-driven growth enthusiasm, and resilient earnings—though elevated valuations, slowing job growth, and uncertainty over another rate cut keep expectations measured.

The Federal Reserve has kept interest rates unchanged this year due to concerns that tariffs could reignite inflation. This concern, strong job growth, and low unemployment gave the central bank time to wait for more data. However, the Fed’s policy stance was tested in early August when the July jobs report showed U.S. employers added fewer jobs than expected and unemployment rose to 4.2%. The report suggested that high borrowing costs are weighing on the economy and that the focus should be shifted from inflation risk to slowing economic growth.

Stocks climbed to new highs in July, with the S&P 500 and Nasdaq both logging six consecutive record closes late in the month. Investor sentiment improved after better-than-expected Q2 earnings and trade agreements with Japan and the EU, with tariff rates on the deals less severe than feared. However, by month-end, market leadership was top-heavy again, with the Magnificent 7 gaining over +5% after leading AI firms reported strong Q2 earnings. Volatility remained subdued for most of July.

Markets have weathered two months of policy-driven volatility, only to return roughly to where they started. After a nearly 20% decline from late February to early April, the S&P 500 has rebounded and is within 4% of its all-time high. What remains is weakened business and consumer confidence, rising inflation expectations, and a Federal Reserve that has paused interest rate cuts. The threat of a full-scale trade war and global supply chain disruption has diminished, but the full impact of recent events may take months to become known.

Markets were turbulent in April as new White House tariffs initially triggered a sharp stock sell-off, with the S&P 500 dropping over 10% before rebounding to end the month down less than 1%. Interest rates and bond markets remained flat despite volatility. Gold hit a record high, while the U.S. dollar weakened amid policy uncertainty. Overall, US policymaking has played a significant role in driving global market movements this year.

Stocks traded lower in a late-month sell-off as sentiment weakened. The S&P 500’s decline erased most of its post-election gains, which expectations for stronger growth and deregulation under the new administration had driven. Smaller companies underperformed, with the Russell 2000 ending the month more than -10% below its late November peak. Under the surface, the January market rotation continued as last year’s outperformers lagged. The Magnificent 7, a group of mega-cap tech stocks that drove most of 2024’s gains, fell by -8% and dragged down the Nasdaq 100, the Large Cap Growth factor, and the S&P 500.

Stocks traded higher to start 2025, but there was a change in market leadership as the rally broadened. Large Cap Value, which underperformed over the past 12 months, outperformed Large Cap Growth by over +2.5% in January. Likewise, the Dow Jones Index traded back toward its all-time high from early December after finishing the year in a downtrend. In contrast, the Growth factor, Nasdaq 100, and Technology sector each underperformed the S&P 500 after propelling the index higher throughout most of 2024.

The US presidential election results fueled November’s stock market rally as investors focused on the incoming administration’s policy agenda and its implications. With Republicans taking control of the White House, Senate, and House in January, the following section discusses key policy areas to watch and potential market and economic impacts.

Stocks finished October lower as investors navigated Q3 earnings, the upcoming election, and uncertain Federal Reserve policy. Treasury yields climbed as investors considered the possibility that the Fed may not cut interest rates as much as previously expected. Concerns about fiscal spending also drove Treasury yields higher, with expectations for continued high government spending regardless of the election outcome.

Investors expect the Federal Reserve to start cutting interest rates at its next meeting on September 17th. Fed Chair Jerome Powell signaled the move at last month’s Jackson Hole conference by saying, “The time has come for policy to adjust."

The S&P 500 Index returned +1.2% in July, underperforming the Russell 2000 Index’s +10.3% return. Ten of the eleven S&P 500 sectors traded higher, led by Real Estate, Utilities, and Financials. Technology was the only sector to trade lower, reversing a portion of its rise in the first half of 2024.