Reflecting on 2024: A Year of Strong Investment Returns
For investors, 2024 was a year of economic resilience and favorable market conditions. Despite widespread predictions of a recession at the beginning of the year, the U.S. economy exceeded expectations, delivering steady GDP growth of approximately 2.75% (GDPNow Atlantic Fed estimate) and maintaining a strong labor market. The S&P 500 surged by 25.02%, while the Russell 2000 (R2) small-cap index posted a solid 11.54% gain—underscoring broad-based strength in equity markets.
A key driver behind the market rally was the steady decline in inflation. After peaking near 9% post-pandemic, inflation dropped to approximately 3% by year-end. This development gave the Federal Reserve (Fed) room to shift from its hawkish monetary stance toward a more accommodative policy. Over the latter half of the year, the Fed reduced the Federal Funds rate three times, fueling positive momentum in financial markets.
The Market’s Late-Year Volatility
Despite the overall strong performance in 2024, the fourth quarter reminded investors of the persistent impact of inflation and interest rate sensitivity. Inflation, which had been on a downward trajectory, ticked up modestly in the fall, prompting the Fed to pause further rate cuts. Fixed-income markets reacted swiftly, with the 10-year Treasury yield rising by 100 basis points to approximately 4.5%.
This shift in sentiment led to a notable pullback in equities—the S&P 500 declined 2.38% in December, while the Russell 2000 fell 8.26%.
Market uncertainty was further exacerbated by concerns over potential shifts in policy under the incoming administration. As a result, volatility increased heading into 2025, reinforcing the need for a disciplined investment approach in the face of evolving macroeconomic conditions.
Potential Economic Trends for 2025
Looking ahead, many economists forecast a continuation of favorable economic conditions, including steady GDP growth, moderated inflation, and stable interest rates. Several key themes could further influence economic and market dynamics:
- Reshoring of Manufacturing: A growing trend among U.S. businesses is the movement of manufacturing operations back onshore. This shift could provide a significant tailwind for industrial companies and domestic supply chains.
- Artificial Intelligence (AI) Adoption: AI is poised to reshape industries, creating potential investment opportunities in both technology providers and companies that leverage AI to enhance productivity.
- Corporate Earnings Growth: Analysts project healthy earnings growth for 2025, with S&P 500 earnings expected to rise by 15% and Russell 2000 earnings by 36%.
While these factors could provide tailwinds for equities, investors should approach market forecasts with a degree of caution. Volatility will likely persist as the new administration’s policies take shape, and broader economic conditions remain fluid.
Valuation Considerations and Investment Discipline
At current levels, market valuations present a nuanced picture. The S&P 500 is trading at 22 times forward earnings, near the high end of historical ranges. However, much of this valuation is concentrated in a handful of dominant technology companies (the “Magnificent Seven”) that have thrived post-pandemic.
Meanwhile, the Russell 2000 trades closer to its 15-year average of 18 times forward earnings—suggesting a more balanced opportunity set within small-cap equities.
At Ironwood Investment Management, LLC, we believe that market volatility creates opportunities. Our investment philosophy is rooted in identifying strong businesses with durable competitive advantages, healthy balance sheets, and sustainable business models—companies we refer to as High IQ investments (High “Ironwood Quality”).
This disciplined approach has been a cornerstone of our investment strategy for over 25 years. To learn more about our High IQ Investing framework and how we apply it to a range of investment strategies, read our in-depth blog here: High IQ Investing – Small Cap.
Ironwood Investment Management, LLC: Your Trusted Investment Partner
Navigating the complexities of the financial markets requires a thoughtful, research-driven approach.
At Ironwood Investment Management, LLC, we bring decades of experience and a steadfast commitment to helping clients pursue their investment objectives. Our team is focused on identifying potential opportunities while managing risk in a disciplined and proactive manner.
Why Choose Ironwood Investment Management, LLC?
✔ Proven Expertise – We have been managing investment portfolios for over 25 years, applying a rigorous and time-tested approach to investing.
✔ Research-Driven Process – Our strategies are built on in-depth analysis and fundamental research to identify high-quality investment opportunities.
✔ Experienced Team – Our team has extensive knowledge across various asset classes, enabling us to navigate evolving market conditions effectively.
✔ Client-Centered Approach – We prioritize transparency, communication, and a tailored investment strategy to meet the unique needs of our clients.
Partner with Ironwood Investment Management, LLC for Investment Success
As we move into 2025, we look forward to helping investors navigate the evolving landscape with confidence and clarity.
Whether market conditions present challenges or opportunities, our disciplined approach remains focused on long-term value creation and intelligent capital allocation.
For a copy of the full Q4 2024 commentary letter, or to learn more about our investment strategies, please contact Ironwood Investment Management, LLC:
📞 Phone: (617) 757-7600
📧 Email: info@ironwoodfunds.com
🌐 Website: https://ironwoodinvestmentmanagement.com
Let’s explore how Ironwood can help you achieve your investment objectives in 2025 and beyond.
Important Disclosures & Disclaimers
Past Performance is Not Indicative of Future Results
The performance data provided in this blog reflects past performance, which may not be representative of future results. Investing in small cap stocks and other securities involves substantial risk, including the potential loss of principal. There is no guarantee that any investment strategy will be successful.
Forward-Looking Statements
This blog contains forward-looking statements, including expectations or forecasts about the performance of the market and specific securities. These statements are based on Ironwood Investment Management, LLC’s current beliefs and expectations but are subject to change without notice. Actual results may differ materially from those expressed or implied due to various risks and uncertainties, including market conditions, economic factors, and changes in government policy.
No Offer or Solicitation
This blog is for informational purposes only and does not constitute an offer or solicitation to buy or sell any securities or investments. It is not intended to provide investment advice or to serve as a recommendation regarding any investment strategy. No client-adviser relationship is formed by reading this blog.
Conflicts of Interest
Ironwood Investment Management, LLC may hold positions in or recommend securities discussed in this blog. Clients should carefully review any investment strategy before committing to ensure it aligns with their investment objectives and risk tolerance.
Regulatory Disclosure
Ironwood Investment Management, LLC, is a registered investment adviser with the U.S. Securities and Exchange Commission. Registration does not imply a certain level of skill or training.