As we close the books on 2024, it’s time to look back at what the heck just happened! To our chagrin, barring no major moves lower in the next week, the US stock markets will finish in the Top 10 of annual returns over the past 100 years. Quite an accomplishment when you consider all we dealt with including, but not limited to: 1) major wars and geo-political conflicts, 2) the U.S. debt continuing higher, unsustainably so, 3) The U.S. Federal Reserve lowering interest rates even though the economy was just fine, and 4) this little thing called the U.S. presidential election.

One would imagine a scenario with increasing volatility in the markets, lower stock prices, and major uneasiness among investors given the aforementioned situations. WRONG! Sorry, try again. Not only did the markets behave, sans a few reasonable drops (the largest being in the NASDAQ at -13% in July), this was a banner year for not only stocks, but several other asset areas within which we invest for you.

Stocks Rocks

The S&P 500, for instance, is closing in on a 25% increase, a performance that few analysts had predicted given the early-year economic indicators, including yours truly. This surge was not linear; a notable 10% correction in April due to persistent inflation and delayed rate cut expectations caught many by surprise, as did the July sell-off.

Technology stocks, especially those in Artificial Intelligence (A.I), led the charge in ways that were beyond most projections. The Nasdaq 100 is on pace for a +30% year, making it possibly a Top 5 finish over the past 25 years. This sector’s dominance was unexpected, considering the cautious outlook on tech valuations at the year’s start. One thing we have learned, sometimes the hard way; never underestimate investors’ love of the sexy, high growth Techs.

Part of the challenge we face, truth-be-told, is the valuation of these companies, and making the call on which to keep, put into portfolios, or take out. Many of them are ‘priced for perfection’ and have an unreasonable halo over them. We accept this riddle with an enthusiastic hug, yet it requires our full attention, make no mistake. We will continue to hold those marque Tech names for you, and are far more likely to add to our positions in any meaningful downturn than we are to sell those well-known names.

Smallies Get No Love

Small stocks, often overlooked in favor of their larger counterparts, have seen a wild ride in 2024. We often joke around the office about how difficult the world of small company investing can be, yet we are always hopeful that this part of the markets will shine one day. The reason is quite simple: it’s very unhealthy for Tech stocks to be the ‘permanent’ leader. This creates a lopsidedness that, sadly, will be solved with a sea of tears.

Think back to the Tech Bubble of the late 1990s which saw a meteoric rise in names like Yahoo, AOL, and Pets.com, only to see the NASDAQ fall a heart-stopping -74% from its high in early 2000. It only took a mere 15 years before it regained that level. Let’s not kid ourselves, 2000-2002 showed us that an entire lifetime of savings and investing can be nearly wiped out if we get too complacent. That, I promise you, will never happen here at Infinium. I started my career as a financial advisor in November of 1999, and those early days are forever branded into my brain: the idea that one can never say never when it comes to investing.

Breaking, Bad Bonds

The bond market’s trajectory was actually one of the few that made sense in 2024. U.S. Bonds managed only a 0.9% return since November’s election, and longer-term bonds saw a YTD gain of a paltry 1.37%.  This performance was a stark contrast to the expectations for bonds as a safe haven, with many assuming they would fare better amidst economic uncertainty. We continue to underweight bonds for clients due to the variety of headwinds that exist for them today. Our in-depth analysis of bonds can be found in this year-end post: Breaking, Bad Bonds

US Housing Hangover

In the real estate sector, home prices rose by 2-4%, a modest increase that was unexpected given the high interest rates which were anticipated to further depress the market. The resilience here was surprising, though it came with a backdrop of reduced sales volume and increased rental demand. For a more detailed look, click here: US Housing Market Hangover.

Diversify Your Dough

Managed futures turned out to be an unexpected bright spot for diversification, returning more than 10% so far this year. This asset class benefited from the year’s volatility in ways that many investors hadn’t anticipated, showcasing the value of alternatives in an unpredictable market environment. Again, these investments don’t fall into the traditional categories most commonly found in an investor’s portfolio. And that is the point; get something truly different into the mix, that can reduce the risk but hopefully not drag performance. Overall, we look to this part of the markets to deliver 6-8% no matter what is happening in other corners of the markets. A double-digit gain, therefore, puts a smile on our faces.

Stay Away If You Hate Grey

To be a successful investor, one must be comfortable with a very high degree of uncertainty most of the time. The road to successful investing is always foggy. In retrospect, 2024 was a year where the markets repeatedly defied expectations and proved that lots of extraneous events and circumstances sometimes don’t mean squat! From the unexpected strength in stocks, particularly tech, to the underwhelming performance of bonds, the year underscored the complexities of trying to defog the crystal ball. The outcomes serve as a reminder of the market’s ability to surprise even the most seasoned investors, emphasizing the need for us to remain flexible and quickly react to whatever comes our way.

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