The following views and perspectives are formed by the work of the Applied Equity Advisors team in managing assets for investors.
31.01.2025 | 06:12 Uhr
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After two years of the S&P 500 index generating over +20% returns annually, I sense much more optimism than I did in 2023 and 2024.1
This is a shame since the peak to trough -25% SPX decline in 2022 offered such a great buying opportunity.2
Given the sense that I am no longer an out-of-consensus bull, it is emotionally tempting to remain contrarian and turn bearish.
However, the third year of a bull market, while producing
only a mediocre return on average, is typically not negative.3
In my opinion, it’s too early for a down year, considering there still remains
too much cash clamoring into equities from the sidelines.
Gone are the days of the consensus skeptics when daily I would hear, “why
would I buy equities when I can get 5% risk-free.” Not anymore.
Instead, now I hear, “when is the pullback coming to allow cash to be put to
work?" (By the way, we got one on Monday.)
Part of me could see a 2025 scenario where:
RISK CONSIDERATIONS
Diversification does not eliminate the risk of loss. There is no
assurance that a portfolio will achieve its investment objective.
Portfolios are subject to market risk, which is the possibility that the
market values of securities owned by the portfolio will decline and may
therefore be less that what you paid for them. Market values can change
daily due to economic and other events (e.g. natural disasters, health
crises, terrorism, conflicts and social unrest) that affect markets,
countries, companies or governments. It is difficult to predict the
timing, duration, and potential adverse effects (e.g. portfolio
liquidity) of events. Accordingly, you can lose money investing in this
portfolio. Please be aware that this portfolio may be subject to certain
additional risks. In general, equities securities’ values also
fluctuate in response to activities specific to a company. Stocks of
small- and medium-capitalization companies entail special risks, such as
limited product lines, markets and financial resources, and greater
market volatility than securities of larger, more established companies.
Investments in foreign markets entail special risks such as currency,
political, economic, market and liquidity risks. Illiquid securities may
be more difficult to sell and value than publicly traded securities
(liquidity risks). Non-diversified portfolios often invest in a more
limited number of issuers. As such, changes in the financial condition
or market value of a single issuer may cause greater volatility.
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