Key Events: A quiet Christmas week
Consumer confidence unexpectedly declined in November and the expectations index tumbled to a level associated with prior recessions.[1]
Despite the recently signed government funding bill, outgoing Treasury Secretary Janet Yellen warned Congress about the US debt ceiling, highlighting a likely 2025 political battle over fiscal policies.
Market Review: Leadership stalls
The ‘Mega cap 7’ names that have driven the stock market this year took a pause this week as markets were, generally, subdued during the holiday shortened trading week.
While stocks rose slightly, persistent inflationary concerns caused losses for high grade bonds.
Outlook: Closing out a year of strong stock returns
Global stocks have had a great year: International and emerging markets are up modestly, while small and midcap US stocks have returned over 12% YTD.
These returns are dwarfed by the S&P 500’s 27% gain, led by the ‘magnificent 7’ which are up 72%! [2]
This performance reminds us to think about stock market concentration, as illustrated by the below charts: The first one, from Apollo, illustrates the stock market is more concentrated than at any time in 30 years. The second chart illustrates that most of the returns in the last couple of years have come from very few holdings in the technology sector.
While it is tempting to chase recent market winners, we continue to counsel that diversification is a sound strategy, one we will employ in 2025.
Remembering diversification[3]
After concentrated returns[4]
This material is intended to be educational in nature,[5] and not as a recommendation of any particular strategy, approach, product or concept for any particular advisor or client. These materials are not intended as any form of substitute for individualized investment advice. The discussion is general in nature, and therefore not intended to recommend or endorse any asset class, security, or technical aspect of any security for the purpose of allowing a reader to use the approach on their own. Before participating in any investment program or making any investment, clients as well as all other readers are encouraged to consult with their own professional advisers, including investment advisers and tax advisors. OneAscent can assist in determining a suitable investment approach for a given individual, which may or may not closely resemble the strategies outlined herein.
[1] Source: Bloomberg, Conference Board
[2] Source: Bloomberg
[2] Source: Bloomberg, Apollo Chief Economist
[2] Source: Bloomberg
[5] Source: Market Returns reference the following indices: Large Cap – S&P 500, Mid Cap Growth – Russell Midcap growth, Mid Cap Value – Russell Midcap Value, Small Cap – Russell 2000, Developed – MSCI EAFE, Emerging – MSCI Emerging Markets, Aggregate – Bloomberg US Aggregate, High Yield – Bloomberg High Yield
OAI01066