Our goal for Investment Perspectives is for it to be one of the ways that we communicate our thinking (past and present) to clients and the general public. We believe that investing is an iterative process and we know of no better way to test our own thinking than to share it with others. We encourage readers to send us their thoughts or questions.
Latest Investment Perspectives
Breadth, Ballots & Bubbles
As we close the books on 2024, U.S. equity markets posted impressive results, with the S&P 500 reaching 57 new record highs despite persistent inflation, shifting Federal Reserve policy, and heightened geopolitical tensions. Yet these headline numbers obscure significant disparities in market performance. A small group of “Magnificent Seven” mega cap stocks accounted for a disproportionate share of the year’s gains, a concentration clearly evident when comparing the S&P 500 to its equal-weighted counterpart. Meanwhile, the Federal Reserve began reducing rates in the fall—after maintaining elevated levels for most of the year—lowering the benchmark by 50 basis points in September, followed by two 25-basis-point cuts in November and December. Although inflation moderated from 3.3% in January to 2.7% by November, the Fed signaled a more measured approach to future rate cuts than many had anticipated.
In this quarter’s Investment Perspectives, we spotlight several themes as we enter 2025. We examine the implications of narrow market breadth for portfolio positioning, analyze how the November presidential election influenced market sentiment, and identify signs of market euphoria that reinforce the importance of disciplined investing. Through all these dynamics, our core philosophy remains unchanged: we seek high-quality businesses trading at reasonable valuations. While a handful of popular stocks have reached frothy valuations, we continue to find compelling opportunities in companies with strong business models, healthy balance sheets, and sustainable competitive advantages.
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