February 2025
The S&P 500 Index rose by 25% in 2024; however, beneath the surface, the market told a more complex story. The top 10 stocks now comprise nearly 40% of the index. Even more extreme, Microsoft, NVIDIA, and Apple account for almost 20%. In contrast to the strong performance of these large technology companies, , the equal-weighted S&P 500 Index was up 13% and the Russell 2000 Index (small-cap stocks) was down for its longest streak ever: 14 days in December. According to Meghan, this huge discrepancy between big and small companies is indicative of a more concentrated and less healthy market.
So, what's going to happen next? Jeff says Goldman Sachs projects an annualized return of 3% from stocks over the next 10 years, which is quite low relative to history and investor expectations. Although no one can tell what the near-term future holds, high valuations generally result in lower returns over the following 10 years.
Shifting gears to cryptocurrency, 2024 was a huge year for Bitcoin, with more adoption and institutional recognition than ever before. Although Meghan and Jeff believe the fundamental principles of Bitcoin are intriguing, they prefer gold due to its historical stability and proven role as an inflation hedge. To many people's surprise, gold outperformed stocks in 2024, rising 27% despite higher interest rates.
Furthermore, the bond market continues to face challenges due to higher rates, with the broad-based bond index enduring its longest drawdown in history at 53 months. Our bond strategies have been positioned very differently as we have largely avoided the damage resulting from rising interest rates.
Looking ahead, while potential new tariffs could offer some short-term economic boosts, they can also result in long-term inefficiencies and inflation. However, this depends on how trade negotiations and targeted tariffs are implemented. Jeff and Meghan are also skeptical about how effective proposed government spending cuts will be in lowering our country’s annual budget deficit. Additionally, high stock valuations and geopolitical uncertainty make markets increasingly vulnerable to shocks.
In response, Morton Wealth continues to focus on identifying asset classes beyond stocks and bonds to protect against this uncertainty. Specifically, Jeff and Meghan highlight private lending investments backed by assets that are designed to provide steady returns and cash flow along the way. Jeff and Meghan remain cautious yet optimistic, seeking resilient investment opportunities that can perform well across varying market conditions.
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Disclosures: Information and references to specific investments presented herein are for illustrative purposes only and subject to change without notice. It is not intended as investment advice and should not be construed as an offer or solicitation with respect to the purchase of any security. Investment opportunities described may only be available to eligible clients and involve a higher degree of risk. Each investment opportunity is unique, and it is not known whether the same or similar type of opportunity will be available. Morton makes no representations as to the actual composition or performance of any security. All investments involve risk, including the loss of principal. Past performance is no guarantee of future results. There is no guarantee that the investment objective will be achieved. Morton Wealth makes no representation that the strategies described are suitable or appropriate for any person, and should not be assumed that Morton will make investment recommendations in the future that are consistent with the views expressed herein. You should consult with your financial advisor to thoroughly review all information before implementing any transactions and/or strategies concerning your finances.
