Happy Thanksgiving! As the S&P 500 has soared by 16% this year, investors can reflect on a range of positive developments that have contributed to this financial uplift. While many may feel the familiar holiday hangriness while waiting for turkey to roast, the stock market’s performance offers plenty to be grateful for this season.
One pivotal moment this year occurred when former President Trump’s initially proposed “reciprocal” tariffs on a wide array of goods were reconsidered. Announced on April 2, these high tariffs sent ripples of concern through the market, leading to a brief dip. However, Trump soon paused these plans for 90 days, which resulted in a subsequent 37% rally in the S&P 500. For many retail traders who leaned on a buy-the-dip strategy, that quick downturn presented a prime entry point.
Inflation, often a major worry for economists and investors alike, has not been as problematic as initially feared. Though Trump’s adjusted average tariff rate on imported goods has increased significantly—from 2.3% to approximately 13%—the anticipated inflationary pressures have remained manageable. The Consumer Price Index (CPI), while slightly above the Federal Reserve’s ideal range, has permitted the Fed to implement rate cuts in September and October, with expectations for another reduction in December. Given that rate cuts typically bolster market sentiment, this has further supported investor confidence.
The surge in AI-focused investments has been another cornerstone of market performance this year. Despite concerns regarding a potentially overinflated AI bubble due to the high concentration of the top 10 stocks in the S&P 500—which comprise about 40% of the index—many investors have enjoyed substantial gains. This surge indicates an undeniable enthusiasm for artificial intelligence technologies and their role in shaping future markets.
Gold prices have also experienced an impressive rally, rising by 56% during the same period. Traditionally viewed as a safe haven during times of economic uncertainty, gold’s resurgence can be attributed to increasing government debt levels and geopolitical risks. This dual performance of gold and stocks has been unusual, yet it reflects a sentiment of safety alongside a thriving equity market.
Lastly, Warren Buffett continues to make headlines, although the investing giant has stepped back from playing a leading role at Berkshire Hathaway. His annual letters to investors, however, remain much anticipated. In his recent letter, Buffett took a moment to express gratitude and encapsulated his timeless wisdom, wishing all readers a happy Thanksgiving, including “the jerks; it’s never too late to change.”
As the holiday unfolds, investors can take solace in a year marked by substantial market growth, strategic economic adjustments, and the continued relevance of seasoned voices like Buffett’s in the investment landscape.
