At this time of year, I like to reflect on larger trends and then highlight lessons that we can take to the following year. To sum up 2024, think of the letter I, as in i-nflation, i-nterest rates, and i-nvestments, which dominated headlines.

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The year in money: inflation eased, optimism ticked upward

Inflation, the first “I”
Although the rate of inflation retreated from the post-COVID peak of 9.1 percent annually, consumers continued to struggle with still-high prices on everything from insurance to child care to rent.

The final inflation report of 2024 will be released in January, but through November, the Consumer Price Index (CPI) increased to 2.7% from a year ago and the core rate, which strips out volatile food and energy, is up 3.3% from a year ago.

To translate those numbers in an easy-to-understand way, today it takes almost $123 to buy what $100 bought in November 2019.

Interest rates, the second “I”
To beat back inflation, the Federal Reserve kept interest rates at a 23-year-high of 5.25% to 5.5% throughout most of the year. Those high rates were tough on borrowers, who continued to struggle with almost 22% average rates on credit card balances and 8% to 9% for new and used cars.

If borrowers were the losers of a high-interest rate environment, savers have been the winners. Rates have dipped below 5% on high-yield savings accounts and certificates of deposit, but there are still plenty of good deals out there for consumers.

The Fed shifted gears in September, when it cut interest rates for the first time in four years. The central bankers started with a 0.5 percentage point reduction, followed by two quarter-point cuts in November and December.

Although anything can happen, for 2024, the Fed has engineered an economic soft landing. That’s the oft-desired, though rarely achieved goal of hiking interest rates to bring down inflation, without triggering a recession.

Although the Fed does not directly control mortgage interest rates, the cost of financing a home remains elevated. A 30-year fixed rate loan stands at the mid 6% range, just one-half of a percentage point lower than it was at the beginning of 2024. High interest rates and still-low inventory remain barriers to entry to would-be homebuyers.

Investments, the third “I”
Prior to the election, investors were already enjoying double-digit returns on stocks. Those gains continued after the election was decided, on hopes that a second Trump administration would keep taxes low and ease regulations.

As stock indexes reach new highs, you may encounter two ends of the emotional spectrum: euphoria or anxiety. I would caution against either of those extremes, because acting on either of them could cause long-term investors a lot of pain.

Ben Carlson, director of institutional asset management at Ritholtz Wealth Management recently provided this excellent advice: “You should only invest in the stock market an amount you would be willing to hold through both bull and bear markets. No one can predict when stocks will take off or get crushed, so your asset allocation should take that into account.”

In fact, the past five years have been an ideal period to remind everyone that market timing does not work. Few can pick the ideal time to buy or sell, which is why adhering to a diversified portfolio of cheap funds over the long term will likely keep you out of trouble.

Three more “I”s
For many, this is a time of year to catch your breath, refuel, and reconnect with friends and family. With a hat tip to the letter I, may the season inspire, illuminate, and invigorate us all.

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Jill Schlesinger, CFP, is a CBS News business analyst. A former options trader and CIO of an investment advisory firm, she welcomes comments and questions at [email protected]. Check her website at www.jillonmoney.com.