The stock and bond markets were mixed over the fourth quarter, though up for the year. Large-company stocks rose 2.4 percent for the quarter, and 25 percent for the year. Small-company stocks were up just 0.3 percent for the quarter, and up 11.5 percent for the year. Foreign stocks lost 8.1 percent for the quarter but gained 3.8 percent for the year. Bonds were down 2.1 percent for the quarter and up 2.5 percent for the year.
The result of the November election, and the range of anticipated policy changes under the incoming administration, will have many direct and indirect reverberations throughout the economy and the investment markets. The administration has already proposed numerous individuals for cabinet and other high-level offices, many with unconventional backgrounds and limited or no public policy or government experience. One could be forgiven for recalling Plato’s Republic dialogue in which he presents the “ship of fools” allegory about a ship with a dysfunctional crew. The metaphor is intended to represent the problems of governance in a political system not based on expert knowledge and experience.
The markets have generally performed well since the election, largely on the expectation of reduced taxes and easing of government regulation that have been proposed. The President-elect has threatened to impose substantially increased tariffs on imported goods from several countries, which has caused concern among many economists. Tariffs (ironically considered taxes themselves) are intended to make imported goods more expensive and thus make domestically produced goods relatively less expensive, thereby encouraging domestic manufacturing. It is widely acknowledged that tariffs are inflationary and that excessive inflation is a hazard to the economy and household budgets.
The rate of inflation has slowed dramatically in 2024 to a rate of about 2.7 percent from a calendar-year high of 8.0 percent in 2022. Though it’s important to remember that while the rate has slowed, prices have not come down, and almost never do. Those 8 percent higher prices from 2022—and from every other year—get baked-into current prices and compound every year.
Surprisingly, the inflation rate has not been equal for consumers across the income spectrum. In recent years, inflation has been higher for product and service categories which are more important to low-income households. Low-income people spend more of their income on necessities, such as rent, utilities and food, and less on things like cars, furniture, clothing, and electronics. Estimates put the 2024 inflation rate for the poor at about 6.3 percent, or about 75 percent higher than the overall rate of inflation.
Incomes can rise along with inflation, thereby offsetting its effects. Though while the lowest-paid workers saw the greatest wage increases during the pandemic, since 2022 wage growth for this group has slowed considerably and now lags behind that of the highest-income households. This all matters for many reasons, including for elections. As reported by The Conversation, “According to the exit poll data, Kamala Harris won among families who made less than $30,000 in 2023 and those who made more than $100,000. By comparison, Trump won among families who earned between $30,000 and $99,999, too much to qualify for government assistance, but—in many cases—not enough to get by.” The economy in the U.S. isn’t working for many people, and that’s a grim problem.
Our recent collision with inflation has served to pull back the curtain on trends that have been simmering for years—income and wealth inequality. According to Statista, in the first quarter of 2024, almost two-thirds of the total wealth in the U.S. was owned by the top 10 percent of earners. In comparison, the lowest 50 percent of earners owned 2.5 percent of the total wealth.
As poverty is correlated with suffering—including mental health conditions, chronic disease, and lower life expectancy—a frank discussion about the morality of our current wealth inequality is surely warranted. Though separately, the 2024 Nobel Prize in Economics winners Daron Acemoglu, Simon Johnson, and James Robinson have received much attention for their work, presented in their bestselling book, Why Nations Fail: The Origins of Power, Prosperity, and Poverty. Among their conclusions was that nations with inclusive institutions create a virtuous cycle where broad participation and access to economic opportunities lead to sustained growth and prosperity. Conversely, nations that concentrate power and wealth within a group of elites who exert outsized influence over political and economic systems leads to the creation of extractive institutions and a vicious cycle of poverty and inequality. If this sounds familiar to you, your reasoning is sound.
Reducing income and wealth inequality in the U.S. will require a comprehensive approach that involves tax reform, better access to education, wage policies, healthcare access, and labor protections, alongside efforts to close racial and gender disparities. While these measures face political and ideological opposition, evidence suggests that addressing inequality is not only beneficial for social justice but also for long-term economic growth and stability.
FROM THE TEAM: MANY THANKS, SCOTT!

This is Scott Secrest’s final Market Report. Scott has been writing these articles diligently each quarter for the past 15 years. Concise and insightful with just the right amount of humor, these commentaries have well-reflected our firm’s personality and our views on economic events. Scott has shown a masterful ability to place short-term incidents into a larger context and to always highlight the importance of responsible capitalism.
Scott, who is based in San Luis Obispo, Calif., joined Natural Investments in 2005, becoming our fifth advisor. We will surely miss his thorough research skills on our funds and portfolios and his expertise evident on our Investment Committee. Scott has helped shape the culture of this firm for the past 20 years with his steady hand and gentle, witty presence. After 35 years as a financial professional, Scott is moving on to his next phase of life. We wish him the best in his next chapter!