With the US Federal Reserve cutting interest rates in September, November, and December¹ totaling a full percentage point, investment sentiment varied heading into the final quarter of 2024 as inflation increased slightly from it's 2.5% low in August to 2.9% in December. This led to the 10 year US Treasury yield increasing to 4.5% causing the price of the 10 year US Treasury to decline. Overall the bond market was mixed, with US prices rising slightly, as measured by the Bloomberg US Aggregate Bond Index, which gained 1.3% in 2024. Global bonds rallied, with the Bloomberg Global Aggregate Bond Index—a broad benchmark of sovereign and corporate debt hedged to the US dollar—up 3.4% for the year.

As measured by the Russell 3000 Index², US stocks rose by 2.6% in the fourth quarter capping off another strong year. Value stocks underperformed compared to growth stocks, especially large-cap growth. International markets, including developed and emerging markets, saw declines, with the MSCI World ex USA IMI Index down -7.4% and the MSCI Emerging Markets IMI Index down -8% for the quarter. Information technology stocks in emerging markets had a positive quarter. However, the US, along with Taiwan and Singapore, posted positive returns. Despite overall declines, there were some positive trends, including value premiums in international developed markets and profitability premiums in emerging markets.

(For a more thorough breakdown, see IFA Founder and CEO Mark Hebner's video below.) 

Domestic Equities 

Five out of six of IFA's domestic equity indexes posted positive returns with exception to Large Value which posted a -2.16% for the quarter. Leading the way was Large Growth posting a 6.97% return for the quarter and 32.68% return for the year. All-in-all each of IFA's domestic equity indexes posted positive returns for the second year in a row with five out of six posting double digit returns.  

International Equities

All International Indexes finished the quarter in negative territory. The IFA International Small Company Index which topped returns of large-cap indexes ending Q3 up 9.37% did an about face and returned a -7.87% for Q4. Overall, all IFA International Equity Indexes returned postive results for the year with the IFA International Value Index posting a 7.26% return.

Emerging Markets Equities

Stocks issued by companies based in developing countries ended down for the quarter with all of IFA's Emerging Market Indexes posting negative returns for Q4. For the year, all of IFA's Emerging Markets Indeces posted a positive return with the IFA Emerging Markets Index leading the way coming in with a 8.04% return.

Real Estate Equities

Similar to second quarter of 2024 we saw real estate markets around the world decli ne and finish the fourth quarter in negative territory. What a difference a quarter can make as Q3 saw REITs outperform all other asset classes. IFA's Global REIT Index ending the quarter in double digit territory posting a return of 16.46%. As we say it's almost impossible to know which asset class will outperform the rest from quarter-to-quarter or year-to-year. This is why we always recommend diversifying your portfolio not only to capture the outperformance of asset classes, but also to reduce risk by giving you access to a wider range of investment opportunities. For more on what a diversified portfolio should look like click here. For Q4, the IFA Global REIT Index posted a -9.82% while finishing the year positive with a total return of 1.92%.

Fixed-Income

For Q4, IFA's fixed-income benchmarks produced returns topping 1%. The IFA Short Term Government Index and the IFA Five-Year Global Fixed Income Index both led with a return of 1.25% and 1.19% respectively. Whereas the IFA One-Year Fixed Income Index lagged slightly at 1.15%. The IFA Two-Year Global Fixed Income Index finished up 1.16%. 

IFA Index Portfolios

With stocks and bonds posting mixed returns, IFA Index Portfolios finished the fourth quarter with varied results. Portfolios with heavier weightings to stocks experienced negative returns in Q4 while those titled more towards bonds were positive front runners. For the year, our all equity Portfolio 100 returned 9.01% while our portfolio 10 made up of 90% bonds and 10% equity posted a postive 4.87% return.

Below is an overview of how several IFA Index Portfolios performed in Q4 as well as during the previous quarter. All of these returns are shown net of IFA's maximum annual 0.90% advisory fee through December 31, 2024.

Each quarter, we monitor our recommended funds for clients. As part of that process, we've developed a rating system. For a summary of those results, please feel free to check IFA's latest Performance Monitoring Report (PMR). 

We like to encourage novices as well as experienced investors to engage in an ongoing conversation with an IFA wealth advisor regarding each person's risk capacity. Besides offering an online Risk Capacity Survey, we provide to each client a complimentary and holistic financial plan. 

The wealth of IFA's educational materials are available for Apple iOS and Android devices via the IFA App. This free App is available to download from both the Apple App Store and the Google Play Store for Android.

Footnotes

1. Nick Timiraos, "Fed Signals Plan to Slow Rate Cuts, Sending Stocks Lower," The Wall Street Journal, December 18, 2024.
2. Dimensional, Q4 Market in Review, Jan 14, 2025

Performance results for actual clients that invested in accordance with the IFA Index Portfolio Models will vary from the backtested performance due to the use of funds for implementation that differ from those in the index data, market conditions, investments cash flows, mutual fund allocations, changing index allocations over time, frequency and precision of rebalancing, not following IFA's advice, retention of previously held securities, tax loss harvesting and glide path strategies, cash balances, lower advisory fees, varying custodian fees, and/or the timing of fee deductions.

This is not to be construed as an offer, solicitation, recommendation, or endorsement of any particular security, product or service. There is no guarantee investment strategies will be successful.  Investing involves risks, including possible loss of principal. Performance may contain both live and back-tested data. Data is provided for illustrative purposes only, it does not represent actual performance of any client portfolio or account and it should not be interpreted as an indication of such performance. IFA Index Portfolios are recommended based on time horizon and risk tolerance. Take the IFA Risk Capacity Survey (www.ifa.com/survey) to determine which portfolio captures the right mix of stock and bond funds best suited to you. For more information about Index Fund Advisors, Inc, please review our brochure at https://www.adviserinfo.sec.gov/ or visit www.ifa.com.