2024 delivered another good year for stock investors – the second year in a row with a 20% plus gain in the S & P 500 stock index. Granted the S + P was powered by a handful of big technology stocks e.g., Apple, Amazon, Alphabet, Meta et al. Without them the gain was less than 15%, still respectable. Our picks did well also. Alphabet, Citigroup, RTX, and Truist sported index beating gains. Pfizer was the lone loser, falling about 8%.
What about 2025? Despite ongoing wars overseas, uncertain Trump policies, energy prices, inflation, and other unknowns, we believe the market will be affected by interest rates and corporate earnings, as it always has been.
With the yield on the 10 year Treasury bond over 4.5%, up from about 3.6% last summer, investors see a viable alternative to stocks. The economy is humming, and the Federal Reserve may not continue to lower rates as had been hoped – if at all – to try and contain inflation (3%) that remains well above their target rate of 2%. Corporate profits are expected to remain strong this year, and they need to be to justify current stock prices. The market valuation (DJIA 42,425, S & P 5,869) is about 10% higher than the historical average, using the price to earnings calculator.
If the inflation rate and interest rates moderate, we could see gains of 5-10% for the year at best. Note: Most forecasters, including us, are wrong most of the time about short-term market moves. Still, there are always opportunities regardless of market direction. We like stocks that have lagged – especially in the health care and energy renewal sectors. Bank stocks should continue to do well, especially if the new administration reduces regulations and allows more company mergers. Please contact one of our friendly and experienced advisors for ideas that would complement your individual needs. If you are unwilling to closely monitor your portfolio that is more than $250,000, consider using our popular managed account service. The fee is quite competitive, and accounts are managed by our advisors with over 90 years in combined market experience. For more information, please contact Bob Mann or Charles Harris.
Please contact us for more information about any of the above securities or for a portfolio check-up. For investors with portfolios of $400,000 or more, you might generate several thousand dollars of additional income a month through covered call option selling. Contact Bob Mann for more information, including all risks.
Prices and yields as of December 31, 2024. The above information is believed to be reliable but is not guaranteed to be accurate. Investors should check every investment for suitability for his or her needs. Stock and option investing is risky, and you could lose money. The author and/or his clients maintain positions in all the above-mentioned securities. First Georgetown Securities, Inc. will furnish available information supporting the above recommendations on request.