An investing pioneer Sir John Templeton once said,“The four most dangerous words in investing are… this time it’s different.”
2024 was another very strong year in the stock market. It followed the historical stock market pattern of responding favorably to Presidential elections, regardless of what political candidate wins. A key driver of this resilience is the strength of the American economy—steady growth, low unemployment, and strong consumer spending continue to support financial markets.
That being said, history also teaches us three other important lessons:
Markets eventually return to their long-term averages.The stock market’s average return has substantially grown the wealth ofpatient and disciplinedAmerican investors for many decades. However, the past two years have been exceptional and in fact, the last time we saw stronger back-to-back years for the S&P 500 Index was in 1997 and 1998.1Though 2025 has reasonable potential to be profitable, this year may not be as strong.
Volatility is inevitable but we cannot time it.An investor who attempted to “time the market” and missed only the 10 best days of the S&P 500 Index over the past 25 years had their total return reduced by over half.2In just the past five years, we’ve seen a pandemic, inflation spikes, bank failures, wars on multiple continents, and two Presidential election cycles. Through it all, long-term investors who stayed the course were rewarded. While we don’t pretend to know exactly what 2025 will bring, expect volatility and stay focused on your long-term plan.
Markets thrive on innovation—but sometimes, they overdo it.Artificial intelligence (AI) has dominated the spotlight in the past two years, propelling companies like Nvidia and OpenAI (maker of Chat GPT) to the forefront. While AI is poised to reshape society for decades, early-stage innovations like this often spark market hype. Between 1900 and 1920, nearly 2,000 car manufacturers were formed, yet by the late 1940s, three companies manufactured 90 percent of the cars in America.3Regardless of the latest innovation, it’s important to align your portfolio with your risk tolerance and long-term financial goals.
As this year progresses, we remain committed to our mission of providing thoughtful advice and managing your wealth with the utmost care. Thank you for your continued trust—we truly appreciate the opportunity to serve you.
These views are those of the author, not of the broker-dealer or its affiliates. This material contains an assessment of the market and economic environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. All investments involve risk, including loss of principal. Forward-looking statements are subject to certain risks and uncertainties. Actual results, performance, or achievements may differ materially from those expressed or implied. Information is based on data gathered from what we believe are reliable sources.
1: AMG - Bespoke Report – December 2024
2: AMG - Remaining Invested is Critical – January 2025
3: Confluence Investment Management – Keller Quarterly – January 2025