Dear Clients:
I hope this letter finds you well! My wishes to you and yours this holiday season and as we enter the New Year.
As we look back on financial markets this year, we have seen measured upward performance without significant volatility. Markets have been fairly resilient despite some of the familiar pressures and headwinds we’ve seen in recent years.
In 2024 the market adjusted to a complex and uncertain interest rate environment aimed at combating continued inflation. Numerous geopolitical events continue across the global landscape. We faced our own National election and several other countries have as well.
On the heels of U.S. economic growth, companies continue to generate profit growth. With almost all of The S&P 500 companies reporting quarterly results, earnings grew by 6% year over year. The U.S. consumer also remains strong which is important as our economy is consumer driven, nearly 70% of our economy is driven by consumer expenditures. The lying share of this strong consumer is the labor market. Unemployment remains very low with continued wage growth. A strong labor market with corporate earnings growth provides a strong backdrop for resilient financial markets.
As we near the end of 2024, the S&P 500 is up just over 20% for the year. December has been turbulent but returns are still well above long term averages. Since 2003, the S&P 500 has had a negative return only three times (2008, 2018, and 2022). Most of my newsletters have mentioned cautious optimism. I feel even more strongly about this outlook now given market gains in recent years and the magnitude of such gains. I feel it's a prudent investment strategy to protect portfolio gains when presented in the fashion they have been recently.
Market analysts have done extensive research over the years on passive versus active portfolio management. I’ve been asked more and more about how I approach the subject and my philosophy. I’ve never been a firm believer in either theory and feel each has a place in managing money. In todays’ markets, it is hard to simply buy some target date funds and leave them unwatched for a long period of time. I also don’t believe one can easily time the markets. Having a core portfolio and making smart investment decisions around the core has proven successful for many and is more likely to find people reaching their financial goals.
An example of this practice can be found right here in 2024 into 2025. A phrase many have used is a broadening of the current market rally. In 2024, the overwhelming majority of market gains can be traced back to seven stocks while the remaining 493 in the S&P 500 have had minimal impact on index gains year to date. The opportunity for investors is tremendous within so many underappreciated yet such valuable and strong companies. The passive and active investment philosophies work quite well together in this scenario.
My expectation heading into the new year is one of greater uncertainty and volatility. Although the fundamentals are in place for continued economic growth, I expect wider movements along
the way as we work through economic data, interest rate trajectory, political changes, and continued geopolitical concerns. Discipline and adherence to the financial plan remain paramount.
As always, I want to stress my availability to discuss this newsletter or any other questions/thoughts you may have. No question or conversation is too small. Feel free to telephone (508-405-0065), email (jhartman@accessfits.com), or reach out to schedule a meeting in person. I also want to make myself available, at your discretion through any of the means I just mentioned, to anyone (family, friend, work associate, etc.) who you feel may find value in my services.
Kind Regards,
Jeremy M. Hartman
President, Access Financial & Income Tax Services
