We’ve been through so many challenging events collectively as a fractured country and a warring world in 2024. Let’s list a few here:
- The persistency of inflation remained an issue earlier in the year. The CPI printed at plus 0.4% for 3 months in a row and inflation continued to hover around 4.5% before eventually getting into tamer waters.1
- Iran’s first direct missile attack on Israel in April caused the price of oil to spike as high as $92 per barrel and the S&P 500 fell 5.5% during this time.
- The assassination attempts on Donald Trump’s life this summer sent the country’s already raucous political environment into a frenzy turning the election season into chaos.
- The Russian nuclear threats following Ukraine’s firing of US long-range missiles into the Motherland caught everyone’s notice but the stock market which continued its march higher.
- The valuation of the market as a whole remains high by any standard, whether you are looking at The Buffett Indicator or the Price-to-Earnings ratio of the S&P 500, which currently stands at 29.56 as of 12/20/24, far higher than the median ratio of 17.92.2
Despite all of these challenges, some of which continue to harangue the market, such as foreign wars and especially, the valuation of the market, the market continues to march higher. Year-to-date the Dow is up 13.4%. The S&P 500 is up 24.6% and the Nasdaq is up 30.9%. The conclusion is obvious but needs to be repeated in the face of every headline that comes out. The spoils go to the patient and those that can look beyond the headlines to see the trends. The market soldiers on, and so should we. Stay invested, but as always, do it wisely.
One way to stay invested is to look at other ways to minimize exposure to things that have outpaced their peers by far too much, such as the megacap tech stocks. Our investment committee has identified 2 ETFs that we’ll be considering going forward in an effort to remain invested for you while minimizing what risks we can (when you tell us to take them in your meetings). We are looking at incorporating some equal-weight strategies to your portfolios in response to the megacap tech stocks dominating the index. As of a week ago, those stocks are up to 33% of the weighting of the S&P 500, which to borrow our meeting lexicon, is a lot of eggs in just a few baskets. Please know that we are looking at all the risks out there and that includes the risk of the technology market being just a little too good, too fast.
We wish you and your families a Happy New Year and look forward to a prosperous 2025 with you all!
Sincerely,
The WTA Investment Committee
Source:
2https://www.gurufocus.com/economic_indicators/57/sp-500-pe-ratio
