Stocks were mixed in the last quarter of 2024. Large domestic companies, as measured be the Standard & Poor’s 500, were up 2.1%. The Russell 2000, reflective of smaller US firms, was essentially flat with a minute return of 0.01%. The Nasdaq Composite, heavily weighted in technology companies, surged a nice 6.2%. Foreign firms, generally speaking, took it on the chin, as the Dow Jones World Index (ex US) lost 7.7%.
Investor sentiment vacillated throughout the period. Amid varied inflation data and somewhat robust economic numbers, the Fed did go ahead and cut the fed funds rate twice, but Powell dampened expectations for easy money policy in 2025. Demand for stocks increased for a time after the election results, but that faded into the final trading days of the year.
So what should we expect for 2025? The pessimist (bear) would point out that we have experienced two big market years back-to-back. Indeed, these are the best consecutive years since 1997-1998. Valuations (price/equity, price/book, etc.) are well ahead of historical averages. The academics would argue that we are due for a “reversion to the mean”. On the other hand, the optimist (bull) would argue that we are entering a period of relief from burdensome regulations and an extension of the 2017 tax cuts. Importantly, productivity is increasing, and this will almost assuredly continue with the expansion and adoption of AI systems and tools. All of this, combined with healthy economic growth and an encouraging inflation trajectory, will very likely provide for a continuing bull market.
Short-term market prognostication is purely guesswork, as unforeseeable market-moving world events are, by definition, unpredictable. However, we are very optimistic about the prospects over the medium-term and certainly long-term. Sticking to proven time-tested portfolio management fundamentals is the path to long-term investment success. We recommend maintaining a diversified portfolio designed to provide the expected return and volatility characteristics appropriate for each particular investor.
We are happy to report that McAllister Capital Management has just celebrated our thirty-year anniversary, and we look forward to providing another thirty years of dedicated service to the most important component of our practice – our clients.
Please know we welcome your calls, texts, emails, etc. And, as always, we adhere to our discipline of strategic asset allocation and style diversification; a strategy designed to mitigate overall portfolio volatility and enhance long-term returns.