AIA Newsletter January 2025
2025: Rig for potential heavy weather
Commentary
The S&P 500 gained 23.3% in 2024, following a 24.2% increase in 2023.
This performance was primarily driven by significant advances in specific sectors, particularly technology and consumer services.
The FANG+ stocks performed even better than the overall market.
Energy, Materials, and value stocks underperformed. The AIA portfolio is currently concentrated in these sectors.
As represented by the S&P, the market has now enjoyed back-to-back years of 20%+ returns. The question is whether this will continue into 2025.
It is impossible to know the future, but I think continued outperformance is at risk for many reasons.
As I have said in the past, sentiment and liquidity are what drive markets in the short term.
Fund managers are the most overweight US equities ever.
According to a Conference Board Survey, sentiment is widely bullish, with retail investors the most bullish ever.
This can be expected after two back-to-back years of double-digit gains in the market. Throw in Bitcoin trading above $100k at one point, and speculative juices feed the desire to get rich quickly, and FOMO is heating up.
Fund managers expect the Nasdaq or Russell 200 to be the best-performing index in 2025.
Let's not forget foreign investors; they are all in the US, too.
