Looking Toward 2025

Looking Toward 2025

Here’s a quick update on what we’re paying attention to as we come to the end of 2024:

Markets

Stocks: The market overall is expensive on almost all common metrics: market cap to GDP, price to sales, etc. We are very wary of the most popular, most expensive stocks that have done so well lately. A handful of VERY pricey tech stocks are driving the DOW, S&P500, and NASDAQ,

Bond: The bond bull market ended in 2020 after almost 40 years. Long rates have risen for almost 4 years now, and bond prices have been DOWN for 4 years in a row. We expect that to continue because US government finances are deteriorating (think the debt, Social Security, Medicare) and Treasuries are less attractive as an asset to some countries after we froze Russian assets when they invaded Ukraine.

Government Policies

Changes to income, capital gains, and estate taxes are on the table in 2025; we continue to monitor for those changes and will adjust accordingly.

The stated intent of the incoming administration to reduce regulations is encouraging but it’s too early to draw firm conclusions about how much regulation will be rolled back and the effects that will have on the economy, inflation, and interest rates.

We think inflation is likely to remain higher than the Fed’s target (2%) for the foreseeable future due to :

The huge amounts of money poured into the economy since 2008 such as the Troubled Asset Relief Program (TARP), Quantitative Easing I-III, Covid Relief etc.
Government Borrowing and Spending

Portfolio

We are preparing for higher interest rates AND higher inflation with a meaningful part of the portfolio. We own a couple of the tech stocks that are driving the indices, but we bought them years ago and have been selling into the current buying frenzy. About 10% of our portfolios are invested in 4-5% money markets while looking for opportunities as events unfold.

We are looking for opportunities to buy and taking advantage of opportunities to sell. We aren’t willing to own bonds but are holding “cash” in money market accounts yielding 4-5% while we look. As we find good companies selling cheaply, we will add them to the portfolio.

We Are Here For You

If you need help with or are working on something with a dollar sign attached, we are a resource for you. Here’s a short list of how we can help:

Conduct a portfolio review.
Review your 401(k) plan.
Review life insurance policies and annuity policies. How much do you need? Is the policy doing what you want?
Review your estate planning documents (will, trust, POA, etc.) to make sure they are in line with your plan. If you have questions, we will find the lawyer or the accountant you need to answer those questions.
Help you understand what to do with rollover retirement accounts.
Help you with your minimum required IRA distributions.
Help with budgeting.
Help your children get started.

We wish you and your families a happy holiday season.

The opinions expressed are those of Muhlenkamp and Company and are not intended to forecast future events, guarantee future results, or offer investment advice.