Diamond Capital Management's Market Commentary
December 2024
Darren T. Nyce, CFA
Vice President, Senior Portfolio Manager
Executive Summary:
- The stock market continues to produce excellent returns in 2024.
- We recommend staying the course while monitoring policy developments under the new administration.
- The trajectory of interest rates is trending lower, though the pace of cuts is unclear.
- Economic growth continues, even though challenges exist in the labor market.
U.S. stocks continue to hit record highs. In fact, the S&P 500 set a new all-time high 53 times during the first 11 months of 2024 – that is 23% of the trading days. This gave investors an easy entry into the list of things to be thankful for this Thanksgiving – though hopefully it comes after family, friends, and health. Investors have been pouring money into the market; U.S. equity inflows totaled $141B last month – the largest amount ever. Earnings have helped to push stocks higher, but the bigger driver recently has been the hope that the new administration will bring market-friendly policies to an economy that is already strong.
Some clients ask if the election results should prompt an adjustment to their investment portfolios. Our recommendation is to keep your allocations in line with your long-term plan. We will pay attention to the pertinent issues from the campaign, such as tariffs, taxes, deregulation, immigration, and the debt ceiling, to see which of them become policy. We will also adjust our views as conditions warrant. As always, we will keep our clients’ best interests at the heart of our analysis.
We remind ourselves and our clients that over the long-term, the market trades on fundamentals. The P/E ratio indicates that stocks have become expensive during their impressive run this past two years. While this doesn’t mean it can’t continue, it does cause us to keep shorter-term expectations in check.
With the rate cut by the Federal Reserve a few months ago, we have entered a period of declining interest rates. Most economists expect the short-term rates to travel from above 5% to below 4%, though the timing of this remains uncertain as we see the new legislative agenda impact the economy, specifically inflation and employment.
The Fed will certainly consider a slowing labor picture as they weigh future rate moves. The unemployment rate has crept up to 4.2% with payroll gains and labor force participation slowing. However, for some historical context, the unemployment rate has been below 4.5% for 37 straight months – the 3rd longest streak since 1948.
Thank you for allowing us at Diamond Capital Management to be a part of your financial journey in 2024. We wish you all the best in 2025!
The information and material contained herein is provided solely for general information purposes. This material is not intended to be investment advice nor is this information intended as an offer or solicitation for the purchase or sale of any security or other financial instrument. Any opinions expressed herein are given in good faith, are subject to change without notice, and are only current as of the stated date of their issue. Certain sections of this publication contain forward-looking statements that are based on the reasonable expectations, estimates, projections, and assumptions of the authors, but forward-looking statements are not guarantees of future performance and involve risks and uncertainties. Investment ideas and strategies presented may not be suitable for all investors. No responsibility or liability is assumed by The National Bank of Indianapolis, or its affiliates for any loss that may directly or indirectly result from use of information, commentary, or opinions in this publication by you or any other person.