Is the Glass Still Half Full? The S&P 500 rose 23% in 2024, following a 24% gain in 2023. As we enter 2025, we continue to expect solid economic growth, stronger US productivity, and favorable interest rate policies by global central banks. The US is expected to remain the global economic growth driver with expansion of the current business cycle, increased AI-related capital spending, solid employment growth, and prospects for increasing capital markets activities. Despite this favorable backdrop, there are a variety of factors that may affect US equity performance in 2025. First, we believe much of the robust earnings growth in 2023 and 2024 has been reflected in equity valuations, especially in the fastest-growing AI-related stocks (see below). Over the last two years, higher interest rates combined with the AI capex boom were a key driver of outsized performance by a narrow group of stocks. However, we think these elevated valuation levels leave little margin for error. We think it also places a constraint on the upside for outsized equity gains in 2025.

We are excited to announce that Oliver Luxxe Assets' Senior Research Analyst, Matthew Biedron , has earned a Chartered Financial Analyst (CFA®) designation . This significant accomplishment reflects his dedication to excellence in investment analysis. Matt dedicated over 1,500 hours to study and successfully passed three challenging six-hour exams, all while upholding high standards of ethics, conduct, and work experience in the field. The CFA® designation is widely recognized as the gold standard in finance and demonstrates Matt's commitment to providing the best service to our clients. At Oliver Luxxe Assets, we pride ourselves on delivering customized wealth management solutions based on independent research and analysis for our high-net-worth and institutional clients. Achievements like Matt’s exemplify our mission to maintain a long-term, consistent investment process backed by credentials that reinforce our commitment to expertise and integrity. Please join us in congratulating Matt on his exceptional achievement!

Don’t fight the Fed... It cuts both ways! Year to date, the S&P 500 Index generated a total return of approximately +22% through the end of 3Q 2024. About one-half of this performance was driven by five stocks: Microsoft, Nvidia, Apple, Google, and Meta. This narrow leadership marks a continuation of the “Mag 7” stocks leading the market higher in recent periods. Recall that as the Federal Reserve began raising interest rates in early 2022, investors rotated into large-capitalization technology companies, due to their perceived safety, well capitalized balance sheets, and secular growth opportunities. Since early 2022, the US economy witnessed 11 interest rate hikes and 9 pauses during this 2 ½ year period. As a result of this restrictive monetary policy, economic growth has slowed, the unemployment rate has moved higher, and inflation levels have subsided. Historically, when central banks embark on tighter monetary policies, GDP growth typically slows, corporate profits and margins decline, and overall equity valuations shrink; hence the adage: Don’t Fight the Fed! However, last month, the Federal Reserve lowered the Fed Funds rate by 50 BPS marking a reversal of their recent tight monetary policy. In fact, 30 other central banks across the globe have started cutting interest rates, including the European Central Bank (ECB), the Bank of Canada, and the People’s Bank of China (PBOC). Outside of recessionary periods, this is perhaps the most coordinated monetary-easing cycle globally within the last 25 years. This coordinated easing monetary policy typically leads to accelerated economic growth, including industrial manufacturing, capex growth, and overall corporate earnings. As the title of this Quarterly Newsletter notes: Don’t Fight the Fed….It cuts both ways!

The S&P 500 Index rose double-digits during the first half of 2024. Most of the gains were driven by large-cap technology companies such as Nvidia, Apple, Microsoft, Amazon, and others. Significant capital investments from Hyperscaler companies have powered very strong revenue growth for Artificial Intelligence-related companies. Conversely, consumer-facing markets have begun to experience normalizing growth after a strong period of economic expansion coming out of the COVID period. For example, retail sales in May were tepid for the second consecutive month. We believe the Fed’s rate-hiking cycle and higher inflation may finally be taking their toll on the US consumer. On the flipside, the recent tightness in the US labor market appears to be easing, as the number of unfilled jobs per unemployed person has declined from 2.0 to 1.2 since March of 2022. This dynamic should help alleviate wage pressures and reduce general price inflation in the US from a larger labor pool .

In aggregate, the US economy has remained healthy, driven by a resilient US consumer, declining inflationary headwinds, and still positive GDP growth. Many investors at the start of the year were expecting aggressive interest rate cuts due to a perceived weakening of the economy and softer inflation data as we exited 2023. However, as the first quarter of 2024 unfolded, it appeared that the US was experiencing a second tailwind of growth. For example, the March Manufacturing ISM reading came in at 50.3 versus consensus expecting 48.5, which put the ISM above 50 for the first time since September of 2022.

We're pleased to announce that Oliver Luxxe Assets was named in the Q4 2023 eVestment Brand Awareness Rankings report as a Top 20 Emerging Firm. This is the second consecutive quarter that OLA has ranked in the top 20 of Nasdaq/eVestment's Brand Awareness survey of Emerging Managers. In the report, eVestment ranks the top asset management firms by brand awareness scores for the quarter across multiple global, regional, single product, and asset class categories. Oliver Luxxe Assets is ranked 13th out of 20 leaders in the Global Emerging Managers category. For a link to download the report, click here .

We're pleased to announce that Oliver Luxxe Assets was named in the Q3 2023 eVestment Brand Awareness Rankings report as a Top 20 Emerging Firm.

Early in the third quarter of 2023, there was a continuation of the positive themes seen during much of the year including expectations for a “soft landing” economic scenario underpinned by slowing inflationary trends, a strong labor market, consumer resiliency, and improving corporate earnings. While these themes remained front and center for much of the third quarter, they were increasingly offset with growing concerns about global economic growth and increasing US Federal deficits. In fact, the term “bond vigilante” which was coined in the early 1980s by veteran Wall Street strategist and former Fed Economist Ed Yardeni resurfaced once again in 2023. Yardeni theorized that bond investors were not satisfied with the yields they are receiving for holding longer duration US Treasury bonds due to the risk of persistent inflation and the rising national deficit. As a result, the yield on the 10-year US Treasury bond moved from 3.3% early in the Spring to over 4.7%. We believe this rise in long-term interest rates will aid the Federal Reserve in slowing down the US economy. On the flip side, it increases the likelihood of a recession in 2024 or a potential “credit-accident” in the financial system.

They don’t sound the alarm at the top and they don’t ring the bell at the bottom.