Year end 2024 Update and Outlook for 2025

The stock market maintained its strong momentum in the fourth quarter, climbing 2.5%, bringing the total gain for the year to 25.0%[1] The quarter ended up positive even as stocks limped into the end of the year as investors tried to assess the financial landscape under a Trump administration.

What the Election means for the Market

The outcome of November’s election could have significant implications for the market. Trump campaigned on market-friendly policies such as reducing regulations and maintaining low corporate tax rates, which could drive growth. However, other proposed measures—such as imposing heavy tariffs on imports and large-scale deportations—pose potential risks, as they could fuel inflation and disrupt various industries. In response, the Federal Reserve may counterbalance these inflationary pressures with higher interest rates.

Uncertainty remains around which policies the new administration will implement. However, Trump’s financial appointments, which include experienced Wall Street professionals, may help temper more extreme policy moves. Additionally, given Trump’s apparent view of the stock market as a measure of his success, significant market downturns could prompt adjustments in his approach.

Fed Announcement

The Federal Reserve played a key role in shaping market expectations throughout the year, cutting interest rates three times for a total reduction of 1%, with the final cut in December bringing rates to 4.33%. However, despite continued signs of cooling inflation, the Fed signaled a more cautious outlook, suggesting fewer rate cuts ahead. This shift prompted markets to adjust expectations for 2025, with anticipated rate cuts falling from four to just one, resulting in higher long-term rates and some downward pressure on asset prices.

Portfolio Positioning

In light of these developments, we have made strategic adjustments to our portfolios which could better align with evolving market conditions. On the equity side, we have reduced exposure to China and high-growth stocks, which can be more vulnerable to rising interest rates. Instead, we have increased allocations to industrials and financials, sectors that could stand to benefit from domestic economic policies and deregulation. In fixed income, we have shortened bond durations to better manage interest rate risks in a potentially volatile environment.

We remain committed to maintaining a well-diversified portfolio and will continue to monitor market conditions closely, adjusting our strategy as necessary to navigate the shifting landscape.

LA Fires

Another devastating natural disaster has impacted the U.S., and many people are in urgent need of assistance. For those looking to help, here is a list of reputable charities and organizations actively providing aid on the ground. Using a Donor Advised Fund (DAF) is an effective way to contribute while also maximizing tax benefits. DAFs are simple to set up and use—if you’re interested in opening one, I’d be happy to offer guidance.

American Red Cross is engaging in wildfire relief efforts to shelter families, serve meals, support emergency responders, provide medical care and deliver emergency relief supplies.

Baby2Baby is providing diapers, food, formula and critical hygiene items to children and families impacted by the fires.

Los Angeles Fire Department Foundation is providing critical equipment, technology and emergency resources to support LAFD crews battling the fires.

Los Angeles Regional Food Bank is providing emergency food assistance to families and residents impacted by the fires blazing across LA County. 

On a more uplifting note, there was a picture that went viral of Philadelphia Eagles star receiver A.J. Brown reading a book on the sidelines during their last playoff game. The book he was reading was “Inner Excellence,” by Jim Murphy.  In it he describes the four daily goals.

1.    Give the best of what you have that day.

2.    Be present. Being in the place where there’s no concern for self, no concern for the outcome

3.    Be grateful. Look for he smallest moments, three a day, that were gifts for you. The smaller the better.

4.    Focus on your routines and only what you can control.[2]

While it is a book that focuses on Sports Psychology but can be useful for us all.

[1] https://www.nasdaq.com/articles/third-quarter-2024-review-and-outlook

[2] https://www.nytimes.com/2025/01/13/sports/football/aj-brown-reading-inner-excellence-book-murphy.html

Market has Rallied Back to the Highs. Is it Cause for Euphoria or Fear?

The last six-months have been a wild ride for the market. The big sell-off in the fourth quarter of 2018 is fading from memory and the S&P 500 has pushed back to all-time highs.  For the factors cited for causing the market drop, not much has changed.  Trade talks with China continue, Brexit is still in limbo and growth expectations, as predicted, have moderated.  Yet, here we are, back at “record highs”

I find it humorous when the news hypes the fact that the market is making “record highs.”  Like this is a rare occurrence and a new feat of capitalism.  In fact, taking a long view, the market is usually at “record highs”, as the stock market tends to move in an upward trajectory.  It’s like saying your age is at record highs.  Well, almost.   The market does drop and it can take years to get back to previous levels, but thus far, the long-term trend is for the market to ratchet to higher and higher levels. There are many reasons for this, like: inflation, population growth, and fairly efficient allocation of capital. 

Traders and hedge funds have short time frames in which to show results.  Catching moves (in either directions) is their goal, leading to more aggressive re-positioning of portfolios.  Most individual investors have the huge advantage of a long time frame.  When you have years or decades to mark your success, sharp pullbacks and rallies can be obscured by the long-term trends.

The fact that the market is making new highs should be cause for neither euphoria or fear.  We should put our psychological biases aside and remain committed to our investing plan.  Harder said than done.  Debates over timing the market is great for dinner parties and validating our worth as investors (or financial advisors), but how does it actually translate in our brokerage statements?  It is a worthwhile question to pursue.  One thing is true, considering the 17.6% surge in the S&P 500[1], the risk-reward of investing now is less compelling than at the start of the year. 

Market momentum works both ways.  The market unraveling in December seemed to feed on itself creating an overshoot that was, in hindsight, a great buying opportunity.  Similarly, the rebound action may continue to grind the market higher.  Rebalancing your portfolio is generally a prudent tactic. Buying when the market drops and lightening as it rises to keep your portfolio anchored to an allocation sometimes helps to take advantage of volatile markets--helping both the portfolio and ego.

[1] http://performance.morningstar.com/funds/etf/total-returns.action?t=IVV&region=USA&culture=en_US

Advisory services offered through APG Capital Asset Management, a Member of Advisory Services Network, LLC.

Phone: 713-446-3233  Website: www.apgcap.com

All views/opinions expressed in this newsletter are solely those of the author and do not reflect the views/opinions held by Advisory Services Network, LLC. Indexes are unmanaged and do not incur management fees, costs, or expenses.  It is not possible to invest directly in an index.  The information and material contained herein is of a general nature and is intended for educational purposes only.  This material does not constitute a recommendation or a solicitation or offer of the purchase or sale of securities.  The future performance of an investment or strategy cannot be deduced from past performance.  As with any investment or investment strategy, the outcome depends upon many factors including: investment objectives, income, net worth, tax bracket, risk tolerance, as well as economic and market factors.  All economic and performance data is historical and not indicative of future results.  All information contained herein is derived from sources deemed to be reliable but cannot be guaranteed.