Financial Markets Volatile as Rates Move up to 12 Month HighUS Economy Performing Better than Expected with Select Group of Stocks moving HigherJanuary 5, 2025
By Mitchell Anthony
The US economy continues to surprise almost everyone! An economic slowdown or recession has been expected for the last two years but has not materialized. Employment has remained strong and retail sales and consumer confidence which had fallen off in early 2024 have begun to recover. The Fed had planned to lower rates much further but has seemingly made his last cut until further signs of economic weakness emerge. He is now not convinced that inflation is bottled up. (CPI Figure 3) The financial markets have been confused by the economy and the Fed which have both given us mixed signals on what lies ahead. Will inflation start to tilt back up again and put a clear end to the hope for lower rates? The Industrial side of the economy has been in recession for over a year and most industrial stocks have performed poorly as a result. The best performance in the equity market has come from large cap growth stocks which seem immune to the economic cycle and are driven more by secular consumption themes.
This was clearly illustrated in the performance of stocks in the fourth quarter. The magnificent seven stocks were up over 15% while most value cyclical indices were down and had negative returns. (Figure 1) MACM’s dynamic growth portfolio was up over 5% for the quarter compared to only 2% for the S&P 500 and -2% for most large-cap value indices. The alpha created in Q4 by MACM was largely a result of heavy weightings in secular growth companies and mag seven stocks.Read more
