2024 in Review and 2025 Market Outlook

For stock investors, 2024 was an expectedly great year. Behind the continued bull market for stocks was solid economic growth, falling inflation, Federal Reserve interest-rate cuts, and healthy corporate earnings. In addition, the artificial intelligence boom sparked a second straight year of outsize gains for Big Tech stocks, which in turn led the overall market higher.

For bond investors, performance was muted, with small gains as Fed policy changes contributed to a roller-coaster year for fixed income.

Now, as the first quarter of 2025 gets underway, what’s the outlook for the stock and bond markets? What sectors are most attractive? What should investors do from here? We’ve gathered insights and perspectives from analysts and specialists about market performance, individual stocks, sectors, and mutual funds.

Q4 and 2024 Market Performance and the Economy

Stocks went into the final quarter of 2024 with the market having recovered from a late-summer swoon and proceeded to notch one record high after another. Late December saw stocks hit an air pocket as the Fed signaled fewer rate cuts in 2025, but that still left stocks posting strong performance for the year. The Morningstar US Market Index closed out 2024 up more 24%.

Here is our look at the big market and economic trends from the fourth quarter of 2024, along with Morningstar’s market outlook for the first quarter of 2025 and beyond.

Q4 and 2024 Stock Performance and Outlook

It was another banner year for communications services and technology stocks, thanks in part to the AI boom. Along with that, growth stocks again far outpaced value, and big-cap stocks largely left small ones in the dust.

Which stocks performed best in 2024? Which have lagged? Which sectors and stocks should long-term investors be looking to buy now? We take a deeper dive into how sectors and individual stocks did in the fourth quarter.

Q4 and 2024 Mutual Fund Performance and Top Picks

For mutual fund investors, 2024 brought déjà vu for stocks and a bit of a disappointment for bond funds. Funds with heavier tilts toward mega-cap growth stocks outperformed. Strategies that emphasized riskier bonds did well, but those with greater sensitivity to changes in interest rates struggled.

Here’s a look at Morningstar’s take on how funds performed in both the fourth quarter and full year for 2024.