locate an office

offices near you

office near you

Economy & Markets

Past, present, future: Here’s where we stand

Heading into the weekend, equities are higher, while bond yields are mixed.

The S&P 500 (+1.3%), NASDAQ 100 (+1.7%) and small caps (Solactive 2000 +2.7%) all posted gains.

Ninety-five percent of S&P 500 companies have reported their third-quarter earnings, including the largest, Nvidia, which reported earlier this week. The largest companies in the United States grew their earnings 5.8% year-over-year, beating Street expectations of ~3.5% prior to earnings season. The technology sector continues to perform, accounting for 30% of the index’s earnings growth.

In fixed income, yields movement was muted. The 2-year rose two basis points (bps), while the 10-year was lower by one basis point.

In commodities, gold (+4.2%, on track for its best week since April) and oil (+4%) both rose as geopolitical tensions increased. Reports this week confirmed that Ukraine fired U.S. and British supplied missiles into Russia for the first time as the conflict passed the 1,000 day mark. That, likely in combination with deficit concerns and the hopes of less regulation, pushed Bitcoin (+7%) to new all-time highs. The digital asset is less than 2% from $100,000/coin.

This coming week in the United States will feature lots of turkey, football, and for some families, a Thursday morning 5K. But this time of year also kicks off outlook season on Wall Street. Just this week, we released our 2025 Outlook: Building on Strength.

To get in the spirit, we wanted to reflect on what’s happened, what’s here and what might be coming.

What’s happened, what’s here, and what’s to come?

What’s happened? Markets have climbed the wall of worry in 2024. Investors were worried all year about recession, inflation, the U.S. elections and geopolitics. Where do we stand today? S&P 500 earnings grew +13%, multiples expanded by +11%, U.S. large-cap equities gained +25% and a global 60/40 allocation1 delivered nearly 13% returns. High yield bonds (+8%), private credit (+11%), preferreds (+8%), Bitcoin (+125%) and gold (+30%) also delivered. Cash and bonds lagged risk assets.

Portfolios are closing out 2024 in a position of strength.

What’s here? A nascent recovery in dealmaking and a massive buildout of AI infrastructure to support it.

On dealmaking, the new administration is likely to bring significant changes that could further support the recovery in dealmaking and capital market liquidity. This could include replacing U.S. government agency leadership with personnel less inclined toward heavy regulation. Under President Biden, increased regulation hindered M&A. Currently, ~40% of the S&P 500 market cap is under Department of Justice anti-trust investigations. Trump’s administration may roll back or halt the expansion of regulations, including on AI, encouraging acquisitions.

Capital market liquidity is just starting to recover

Trailing 12-month high yield, leveraged loan, & IPO volume as a % of GDP

Source: J.P. Morgan, Bank of America, Bloomberg Finance L.P. Data as of September 30, 2024. Note - liquidity defined as IPO, HY bonds, and leveraged loan issuance. 

Reduced scrutiny could benefit tech companies, and a backlog of deals with increased private lending could boost transactions, benefiting Wall Street banks, private equity, credit firms and private business owners.

On AI and the infrastructure buildout, the market has already taken notice. Nvidia, the maker of chips crucial for training AI models, officially became the world’s most valuable company.

AI models are improving at a rapid rate. In 2021, large language models (LLMs, a type of AI) could answer less than 10% of competition-level math questions accurately. That share increased to 90% in 2024. The models are also becoming less expensive: The price per token for both OpenAI’s higher-performing GPT-4o mini model and Anthropic’s Claude 3.5 Haiku model are 90%–98% less expensive than their predecessors.

While the hyperscalers (Amazon, Meta, Alphabet and Microsoft) are set to spend $200 billion in capex this year (more than 2x what the U.S. government spends on education annually) for developing new technologies, there is still room to increase AI spending.

Corporate investment has room to boom

5-year annualized change in corporate capital spending, %

Source: Bureau of Economic Analysis, Haver Analytics. Data as of December 31, 2023.

It’s not just the AI modelers who will likely benefit, but also the suppliers of power. Today, about 70% of the transmission lines in the grid are at least 25 years old. Despite this aging infrastructure, the grid has been able to keep up, since U.S. electricity demand has been relatively stable. However, electricity demand is set to increase from here, given the data center buildout and the power demand they necessitate.

Large data centers can require about 100 megawatt hours of electricity (that’s roughly the same power it takes to power a city of ~100,000 households). Currently, data centers account for roughly 4.5% of total U.S. energy consumption. However, some estimates suggest that data centers should drive ~250TWh of new electricity demand through 2030, leading data center power demand to increase to 8% of total U.S. power demand over the same period.

We believe the buildout for AI, including the energy needed to power the technology, is a long-term theme.

What’s to come? 2024 was the year of elections. Globally, incumbents lost power, and anti-establishment candidates and parties gained vote share. This implies a demand for change.

In the United States, President-elect Trump’s and the Republican Party’s victory sets the stage for “Trump 2.0,” which could have important implications for markets and the economy. In 2025, we think the debate over taxes and government efficiency will be top of mind.

On taxes, negotiations to extend the provisions of the Tax Cuts and Jobs Act will take place in the second half of 2025, with the economic impacts likely to be felt in 2026. If Congress does nothing, individual tax rates will revert to 2017 levels, the alternative minimum tax will impact many more high-income individuals, the 20% deduction for pass-through business income will end (affecting many partnerships, S corporations and sole proprietorships), and the lifetime estate, gift and generation-skipping transfer tax exemption will be cut in half (from around USD 28 million to USD 14 million for a married couple). Importantly, the 21% corporate tax rate included in the TCJA was a permanent change. 

Income taxes pre and post Tax Cuts & Jobs Act

Average individual income tax rate, %

Source: Internal Revenue Service and J.P. Morgan. Data as of December 31, 2019. Pre-TCJA is the 2017 rate. Post-TCJA is the 2019 rate. The Tax, Cuts and Jobs Act took effect January 1, 2018.

We expect most, if not all, of the temporary provisions affecting individuals to be extended for some time. That said, given the tight margins in the House and the Senate, it may require some compromise around areas such as the state and local tax deduction cap.

On government efficiency, President-elect Trump is expected to pursue an agenda that advocates for less red tape. Part of this includes a new Department of Government Efficiency (DOGE). We think the Elon Musk–led department, which aims to cut wasteful government spending, will have a difficult time doing so.

Why? The bottom line is that Congress controls government spending, and DOGE sits outside of Congress. The department can make all the suggestions it wants, but ultimately it’s the typical 60-vote majority in Congress that makes legislative changes. A key concern for investors in 2025 is what parts of the Trump 2.0 agenda will be emphasized and which ones will fade.

As we look toward the new year and what’s to come, your J.P. Morgan team is here to help. 

1A 60/40 allocation signifies 60% in the MSCI World Index and 40% in the Global Bloomberg Aggregate Bond Index.

All market and economic data as of November 2024 and sourced from Bloomberg Finance L.P. and FactSet unless otherwise stated.

We believe the information contained in this material to be reliable but do not warrant its accuracy or completeness. Opinions, estimates, and investment strategies and views expressed in this document constitute our judgment based on current market conditions and are subject to change without notice.

RISK CONSIDERATIONS

  • Past performance is not indicative of future results. You may not invest directly in an index.
  • The prices and rates of return are indicative, as they may vary over time based on market conditions.
  • Additional risk considerations exist for all strategies.
  • The information provided herein is not intended as a recommendation of or an offer or solicitation to purchase or sell any investment product or service.
  • Opinions expressed herein may differ from the opinions expressed by other areas of J.P. Morgan. This material should not be regarded as investment research or a J.P. Morgan investment research report.
We review where the markets have been and share key questions for 2025, following the launch of our 2025 Outlook.

EXPERIENCE THE FULL POSSIBILITY OF YOUR WEALTH

We can help you navigate a complex financial landscape. Reach out today to learn how.

Contact us

Important Information

The MSCI World Index is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of developed and emerging markets. The index consists of 23 developed market country indexes and 24 emerging market country indices.

The Bloomberg Aggregate Bond Index or “the Agg” is a broad-based, fixed income index used by bond traders and the managers of mutual funds and exchange-traded funds (ETFs) as a benchmark to measure their relative performance.

Standard and Poor’s 500 Index is a capitalization-weighted index of 500 stocks. The index is designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.

The NASDAQ 100 Index is a basket of the 100 largest, most actively traded U.S companies listed on the NASDAQ stock exchange. The index includes companies from various industries except for the financial industry, like commercial and investment banks. These non-financial sectors include retail, biotechnology, industrial, technology, health care, and others.

The Solactive United States 2000 Index is an index that tracks the performance of the 1,001–3,000 largest companies in the US stock market. The index is based on company market capitalization and weighted by free float market capitalization. 

This material is for informational purposes only, and may inform you of certain products and services offered by private banking businesses, part of JPMorgan Chase & Co. (“JPM”). Products and services described, as well as associated fees, charges and interest rates, are subject to change in accordance with the applicable account agreements and may differ among geographic locations. Not all products and services are offered at all locations. Please read all Important Information.

General Risks & Considerations

Any views, strategies or products discussed in this material may not be appropriate for all individuals and are subject to risks. Investors may get back less than they invested, and past performance is not a reliable indicator of future results. Asset allocation/diversification does not guarantee a profit or protect against loss. Nothing in this material should be relied upon in isolation for the purpose of making an investment decision. You are urged to consider carefully whether the services, products, asset classes (e.g., equities, fixed income, alternative investments, commodities, etc.) or strategies discussed are suitable to your needs. You must also consider the objectives, risks, charges, and expenses associated with an investment service, product or strategy prior to making an investment decision. For this and more complete information, including discussion of your goals/situation, contact your J.P. Morgan team.

Non-Reliance

Certain information contained in this material is believed to be reliable; however, JPM does not represent or warrant its accuracy, reliability or completeness, or accept any liability for any loss or damage (whether direct or indirect) arising out of the use of all or any part of this material. No representation or warranty should be made with regard to any computations, graphs, tables, diagrams or commentary in this material, which are provided for illustration/ reference purposes only. The views, opinions, estimates and strategies expressed in this material constitute our judgment based on current market conditions and are subject to change without notice. JPM assumes no duty to update any information in this material in the event that such information changes. Views, opinions, estimates and strategies expressed herein may differ from those expressed by other areas of JPM, views expressed for other purposes or in other contexts, and this material should not be regarded as a research report. Any projected results and risks are based solely on hypothetical examples cited, and actual results and risks will vary depending on specific circumstances. Forward-looking statements should not be considered as guarantees or predictions of future events.

Nothing in this document shall be construed as giving rise to any duty of care owed to, or advisory relationship with, you or any third party. Nothing in this document shall be regarded as an offer, solicitation, recommendation or advice (whether financial, accounting, legal, tax or other) given by J.P. Morgan and/or its officers or employees, irrespective of whether or not such communication was given at your request. J.P. Morgan and its affiliates and employees do not provide tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any financial transactions.

© $$YEAR JPMorgan Chase & Co. All rights reserved.

LEARN MORE About Our Firm and Investment Professionals Through FINRA BrokerCheck

 

To learn more about J.P. Morgan’s investment business, including our accounts, products and services, as well as our relationship with you, please review our J.P. Morgan Securities LLC Form CRS and Guide to Investment Services and Brokerage Products

 

JPMorgan Chase Bank, N.A. and its affiliates (collectively "JPMCB") offer investment products, which may include bank-managed accounts and custody, as part of its trust and fiduciary services. Other investment products and services, such as brokerage and advisory accounts, are offered through J.P. Morgan Securities LLC ("JPMS"), a member of FINRA and SIPC. Insurance products are made available through Chase Insurance Agency, Inc. (CIA), a licensed insurance agency, doing business as Chase Insurance Agency Services, Inc. in Florida. JPMCB, JPMS and CIA are affiliated companies under the common control of JPMorgan Chase & Co. Products not available in all states.

 

Please read the Legal Disclaimer for key important J.P. Morgan Private Bank information in conjunction with these pages.

INVESTMENT AND INSURANCE PRODUCTS ARE: • NOT FDIC INSURED • NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY • NOT A DEPOSIT OR OTHER OBLIGATION OF, OR GUARANTEED BY, JPMORGAN CHASE BANK, N.A. OR ANY OF ITS AFFILIATES • SUBJECT TO INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF THE PRINCIPAL AMOUNT INVESTED

Bank deposit products, such as checking, savings and bank lending and related services are offered by JPMorgan Chase Bank, N.A. Member FDIC.

Not a commitment to lend. All extensions of credit are subject to credit approval.

Equal Housing Lender Icon