The US stock market capped off the fourth quarter of 2024 with a 2.6% gain putting it above all other major markets for the quarter and for the year. It is hard to believe but no other major market posted a positive result for the fourth quarter. The return for U.S. Stocks was 23.8% well above the median return of 7.7% with only Hong Kong at 23.6% and China at 15.0% coming close. After consecutive calendar years of gains of over 23% gains in the S&P 500 the U.S. stock market is at a pivotal period. Another successful year in 2025 would price stocks to near perfection. This means everything needs to fall into place economically, geopolitically and productivity wise (led by AI) for investors to have smiles on their faces at the end of 2025. It is important for investors to understand that the higher valuations rise the greater both the risk and chance for short-term disappointment will too increase. Time will lessen the risk but as valuations continue to rise here, investors will need to have a multi-year time horizon in the face of upcoming volatility. After a poor final two months, both U.S. Bonds and international stocks (as well as international fixed income) once again significantly underperformed U.S. Stocks. This marks, the fourth year that bonds disappointed and fixed income investors have actually suffered losses in two of those years. Trying to diversify internationally has proved even more damaging for investors which extended its decade of futility. For the fourth quarter the worst performing markets were France at -10.1%, Mexico -10.3%, South Africa -10.8%, Indonesia -10.9%, South Korea -17.4%, and Brazil 19.6%. There is no escape for emerging market investors-emerging markets on average were down -11.2% for the fourth quarter and -3.9% for 2024. We will continue to have a U.S. emphasis, while avoiding bonds, particularly long-term fixed income, in the face of what we expected to be a volatile period ahead.
