Auxier Asset Management Winter 2024 Market Commentary

2025-02-27 23:55:00 ET

Summary

• The S&P 500 achieved a 25.02% return in 2024, driven by strong corporate earnings, tech sector growth, and easing monetary policy.
• AI excitement propelled tech stocks, with the "Magnificent Seven" contributing significantly to market gains, while risky alternative investments like zero-day options surged.
• Pro-growth policies from the new administration and AI advancements are expected to drive future market efficiency and investment opportunities.
• Despite market volatility, focusing on durable businesses with capable management is essential for long-term compounding and mitigating permanent capital loss.

Winter 2024 Market Commentary

A strong economy, corporate earnings growth, a booming technology industry and easing monetary policy led the major stock market benchmarks to a second year of double-digit growth. The S&P 500 ( SP500 , SPX ) returned 25.02%. It has a trailing 12-month price-to-earnings ratio of 29.0 vs the five-year average of 24.2 and 10-year average of 22.1. The equal weight S&P ( SP500EW ) gained 13% for the year. FactSet estimates that S&P 500 earnings in the fourth quarter will grow 11.9%, which would be the best quarter since Q4 2021. For 2025 they are projecting 14.8% growth. Strong earnings have been supported by stock buybacks which reached nearly $1 trillion in 2024 and are anticipated to be $1.5 trillion in 2025 according to Goldman Sachs ( GS ). The dearth of Initial Public Offerings and increasing foreign investment flows have extended the favorable supply/demand dynamic for US stocks in general. Credit spreads between the highest and lowest risk bonds continue to be historically tight. The 20-year Treasury ( US20Y ) declined 9.55% for the quarter and 7.71% for the year (ICE US Treasury 20+ Year Index). This compares to the short-term Treasury bill gain of 5.32% for the year with little risk (S&P US Treasury Bill 0-3 Month Index)....

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