Key Takeaways From the Latest Round of Central Bank Meetings

Executive summary:

  • The Nasdaq Composite Index crossed 20,000 for the first time ever
  • The Bank of Canada delivered another jumbo-sized rate cut
  • We anticipate a broadening opportunity set in private markets in 2025

On the latest edition of Market Week in Review, Investment Strategist BeiChen Lin discussed U.S. equity-market strength as well as recent rate decisions from key central banks. He finished by highlighting the main themes in Russell Investments’ newly released 2025 Global Market Outlook.

U.S. equity markets hit record highs—again

Lin began by digging into the recent strength in U.S. equity markets, noting that the Nasdaq Composite Index crossed above 20,000 for the first time in history earlier this week. Specifically, the tech-heavy index closed at 20,034 on Dec. 11, he said—the latest milestone in a remarkable year for the Nasdaq, which has delivered robust gains of around 35% year-to-date. Outside of the Nasdaq, other major U.S. equity benchmarks have also performed strongly in 2024, Lin noted, with the S&P 500® Index advancing roughly 27% year-to-date and the Dow Jones Industrial Average up by about 16%.

So, how much more could U.S. markets climb? Just because they’ve established new all-time highs doesn’t mean the rally will stop, Lin said, pointing out that equity markets have already broken through record highs multiple times in 2024. However, he noted that as markets have continued to move higher, equity valuations have become more expensive and investor sentiment has turned noticeably overbought (albeit not yet at euphoric levels, according to the strategist team’s composite contrarian indicator).

“This backdrop could create a potential for asymmetry in market returns in 2025, where the room for upside may be more limited. During these types of market environments, proactively rebalancing back to a strategic asset allocation can be an important risk management consideration,” Lin said, noting that doing so would still allow investors to participate in a market rally if equity markets continue to grind higher.