After a holiday hiatus, we welcome 2025 with a look at what worked in 2024 and what that may mean for this year.

One thing that did not work: forecasts. The Fed cut rates fewer times than predicted, and we discuss the recent pivot toward a more hawkish tone, which is part of the reason for the increase in yields on longer bonds. Those higher yields are stressing consumers and businesses, not to mention grinding mortgage activity to a halt. We look at the implications of higher rates and compare some of the small business stress we are seeing in our community versus the strong jobs data being reported, which is influencing the Fed’s outlook for rate cuts.

In the second half, we discuss stock returns in 2024, which were biased upward by a handful of stocks in one (well, two, as defined by the S&P committee) sectors. We compare the level of index concentration, valuation, and performance dispersion versus history and find the clearest parallel with 1998 and 1999. After that period, we saw the following pattern emerge:

• The average stock beat the index each of the next six years.
• Value stocks beat growth stocks each of the next seven years.

We close with our thoughts on why that could be replicated again, specifically given the implications of likely Trump administration policy on merger and acquisition activity, which is off to a strong start.

Learn more about Formidable Asset Management, Will Brown, and Adam Eagleston by visiting www.formidableam.com.