4th Quarter 2024 Client Letter
I hope you and your family members are safe from the hectic weeks leading up to year-end.
Some had snow, and most had cooler weather, helping to make a special holiday season.
Thankfully the markets were hot and not cool this past quarter.
This past quarter had extended runs in the equity markets and some volatility in the bond markets. Strong extended runs in the market are almost always a pull forward because eventually, it’s up to companies to deliver on earnings.
Fourth quarter earnings season will start next week, and we expect them to be front and center as investors look for earnings growth to support present valuations and to analyze how companies are reacting to a declining federal funds rate. Consensus for 2025 EPS growth is close to 15% - which is more than double the historical average. If earnings season offers any red flags on expectations, especially from Mega Cap Tech names, it’ll amplify the concern on valuations.
In addition to corporate earnings, market returns this coming year will also be affected by the Fed’s rate-cutting agenda, domestic politics, and geopolitics. Politics and the path of future rate cuts have dominated the market discussions since the election. We don’t expect that to change in the near term. A new administration is entering the White House later this month and new economic policies could be a wild card for 2025.
- Bull market intact, but above average valuations likely lead to lower returns in 2025 and higher volatility.
- American ‘economic exceptionalism’ keeps recession risk at bay.
- Business friendly policies support earnings, but upside capped by valuations.
Feds ‘slower to lower’, but still on the investor’s side.
Positive trends in global and especially in US.
Fixed income returns down from last year, but still offer excellent risk-adjusted return potential and diversification.
Regards,
Elliot Weissmark, CFP®, CPFA
Senior Vice President, Investments
Any opinion are those of Elliot Weissmark, CFP@, CPFA and not necessarily those of Raymond James. Expressions of opinion are as of this date and are subject to change without notice. There is no guarantee that these statements, opinions or forecasts provided herein will prove to be correct. Investing involves risk and you may incur a profit or loss regardless of strategy selected. Keep in mind that individuals cannot invest directly in any index, and index performance does not include transaction costs or other fees, which will affect actual investment performance. Individual investor's results will vary. Past performance does not guarantee future results. Future investment performance cannot be guaranteed, investment yields will fluctuate with market conditions. Prior to making an investment decision, please consult with your financial advisor about your individual situation.
There is an inverse relationship between interest rate movements and bond prices. Generally, when interest rates rise, bond prices fall and when interest rates fall, bond prices generally rise.
