COMMENTARY HIGHLIGHTS:
- 2024 was the year that the U.S. stock market fully entered the “Roaring Twenties.” The S&P 500 returned 5.9% in the fourth quarter, propelling the calendar year return to 25.0%. This marks the first back-to-back period of +20% returns since 1997-1998. Today the index is highly concentrated and expensive, which creates risks heading into 2025; while we expect a healthy year, the ride may be bumpy.
- Investments overseas did not fare so well: the MSCI ACWI ex-USA Index fell 7.6% in the fourth quarter. However, much of this decline can be attributed to the move in the dollar, which cost US investors nearly 7% in returns for the quarter. Valuations look more reasonable abroad, but trade policy and tariffs will likely be a driver of currency and rate movements going forward, suggesting caution.
- Growth in the U.S. stock market was underpinned by a healthy economy. GDP is forecasted to grow at 2.7%, boosted by notable productivity gains, low unemployment, and stable inflation. We enter 2025 on solid economic footing, though there is weakness in some areas, including the low-end consumer.
- Against this backdrop, the Fed decided to leave a lump of coal in the bond market’s stocking as its comments turned hawkish in December, sending bond prices south. The Bloomberg Aggregate index fell 3.1% for the quarter. Interest rates rose as investors lowered their expectations for future rate cuts. We believe that markets continue to underestimate future inflation and the impact of the spiraling deficit, which is why we see an opportunity to take advantage of higher base rates in traditional fixed income and stay away from longer duration assets.
- Although traditional bonds ended the year on a sour note, other areas of the fixed income market delivered excellent results well within our expectations. AlphaCore managers in structured credit and private credit both delivered low double-digit returns. Multi-strategy hedge funds also excelled in 2024, with most flagship strategies also delivering low double-digit returns. We retain our strong conviction in both non-traditional credit and multi-strategy hedge funds.
- Looking back at 2024 through the prism of history, one cannot help but recall the seismic change augured by the original Roaring Twenties. Then as now, we find ourselves navigating the aftermath of a global pandemic, geopolitical reshuffling, and economic turbulence. For investors, the lessons remain timeless: prudent risk management, disciplined rebalancing, and a focus on long-term fundamentals are as relevant now as they were a century ago.
If you are interested in how AlphaCore Wealth Advisory can help you reach your investment goals, please do not hesitate to contact us.
COMMENTARY CONTRIBUTORS
Eric Gerster, CFA®
Chief Investment Strategist
Johann Lee, CFA®
Director of Research
Edward J. Durica, III, CFA®
Senior Wealth Advisor
Madeline Hume, CFA®
Senior Research Analyst
IMPORTANT INFORMATION
This material is being provided for informational purposes only. This commentary represents the current market views of the author, and AlphaCore Capital in general, and there is no guarantee that any forecasts made will come to pass. Due to various risks and uncertainties, actual events, results or performance may differ materially from those reflected or contemplated in any forward-looking statements. The opinions are based on market conditions as of the date of publication and are subject to change. No obligation is undertaken to update any information, data or material contained herein.
Neither the information nor the opinions expressed herein constitutes an offer or solicitation to buy or sell any specific security, or to make any investment decisions. AlphaCore provides investment advice only within the context of our written advisory agreement with each AlphaCore client. AlphaCore is a registered investment adviser. Registration does not imply a certain level of skill or training. Past performance is not indicative of future results. The value of an investment may be affected by a variety of factors, including economic and political developments, interest rates and foreign exchange rates, as well as issuer-specific events. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein.
Any specific security or strategy is subject to a unique due diligence process, and not all diligence is executed in the same manner. All investments are subject to a degree of risk, and alternative investments and strategies are subject to a set of unique risks. No level of due diligence mitigates all risk, and does not eliminate market risk, failure, default, or fraud.
The commentary may utilize index returns, and you cannot invest directly into an index without incurring fees and expenses of investment in a security or other instrument. In addition, performance does not account other factors that would impact actual trading, including but not limited to account fees, custody and advisory or management fees, as applicable. All of these fees and expenses would reduce the rate of return on investment.