Clarity Capital Management Notables - January 2025
CLARITY CAPITAL MANAGEMENT NOTABLES AUDIO VERSION
Happy New Year to our community! As we reflect on 2024, we’re reminded of the ups and downs that defined the year in the markets and beyond. With record highs, persistent inflation concerns, and shifting economic policies, it’s been a dynamic year for investors! We’re excited to share this quarter’s insights and highlight what these developments mean for you. Whether it’s understanding the Federal Reserve’s actions, the impact of recent political developments, or how to stay diversified in uncertain times, we’re here to provide clarity and confidence as we plan for 2025 and beyond.
The fourth quarter of 2024 was marked by significant volatility in U.S. stock markets, with all three major equity indices – the S&P 500, DJIA, and NASDAQ – hitting record highs in early December. These peaks were driven by strong economic data and investor optimism, boosted in part by positive corporate earnings.
However, this enthusiasm quickly faded as inflation proved to be more persistent than anticipated, forcing the Federal Reserve to adopt a more hawkish tone. Concerns about fewer anticipated rate cuts in 2025 weighed heavily on sentiment, eroding much of the early December gains and leaving indices with only modest quarterly growth by the year's end. For Q4 2024, the DJIA rose 0.9%, the S&P 500 gained 3.0%, the NASDAQ jumped 7.8%, and the Russell 2000 edged up 1.5%.
Markets experienced a notable surge in November following the midterm elections, which heightened expectations of deregulation under the incoming Trump administration. The prospect of a more business-friendly environment initially bolstered equities, as investors anticipated reduced regulatory burdens for key sectors such as energy, finance, and technology. However, this optimism was short-lived. During its December meeting, the Federal Reserve dashed hopes for aggressive monetary easing, revising its projection to just two rate cuts in 2025, down from the previously anticipated four. This shift signaled to investors that the fight against inflation remains a top priority, further weakening risk appetite and triggering a broad market pullback.
As we move into the new year, most measures of U.S. economic activity continue to demonstrate resilience. The U.S. labor market remains strong, with few signs of notable deterioration. U.S. GDP increased at a 3.1% annualized rate in the third quarter of 2024, with an expected growth rate of 2.8% for the full year. Though inflation has moderated from its highs over the past several quarters, forecasts suggest that further aggressive rate cuts by the Fed are unlikely.
We continue to believe that diversification is key to managing risk and capturing returns across asset classes. While market performance has been robust, risks always remain. High borrowing costs persist due to the prevailing interest rate environment, along with continued political uncertainty that is expected to increase in the coming months. These factors further emphasize the importance of diversification as a strategy to mitigate concentration risk.
Looking ahead to 2025, we remain committed to helping you navigate these complex markets and achieve your financial goals. If you have questions, please don’t hesitate to reach out.