Year in Review

2024 was a difficult year for pessimists. The U.S. equity market soared to record highs, with large company stocks in the vanguard and technology at the forefront for a second consecutive year.  Outside the U.S., equity markets posted positive returns, though most countries lagged America’s performance. Less volatile assets, such as bonds and cash, provided comparatively modest returns. All in all, it was a gratifying year for long-term investors.

Exceptional Progress

There is talk of “American Exceptionalism” after more than a decade of outperformance by U.S. stocks and an economy that has been uniquely resilient. Indeed, American companies have produced exceptional business results. This can be quantified in measures such as growth of earnings and dividends. More interesting is to consider the transformative business achievements of recent times – digital commerce, mobile communication, cloud computing, and artificial intelligence. Large American companies have led these innovations. Mario Draghi, President of the European Central Bank from 2011 to 2019 and later the Prime Minister of Italy, recently lamented Europe’s lagging productivity and admired the intrinsic dynamism in American capitalism. In his analysis, Mr. Draghi noted that six U.S. companies with market capitalizations exceeding $1 trillion had been incorporated in just the last fifty years, while no comparably successful European company was created during this same period.

Exceptional Debt

Another foundation for American supremacy is our ability to borrow globally. And how we borrow! In recent years, our government budget deficits have exceeded 6% of GDP, a level usually associated with economic distress or war, but evident today despite growth and low unemployment. Because the U.S. dollar is the world’s reserve currency, a financial hegemony cemented after WWII, Uncle Sam has a worldwide pool of buyers for his Treasury bonds. It is as though he has twenty credit cards while other countries have just one or two. Given such an advantage, it is no wonder America’s growth has been exceptional. However, we should neither rely on the kindness of strangers, nor take their forbearance for granted. We have seen recent financial distress in countries such as France and Great Britain, provoked by budget problems. Something comparable occurred in the U.S. as recently as the 1980s and 1990s, when rising long-term interest rates stirred policymakers to make necessary fiscal reforms. This matters for investors because big deficits have juiced America’s economy relative to other countries, while eventual belt-tightening could slow our growth. This is one factor, among many, that encourages us to lean conservative in our financial planning assumptions.

Principles instead of Predictions

It wouldn’t be a new year without economic and stock market forecasts, made more interesting in 2025 by the inauguration of new leadership in Washington. Bartlett has long regarded these seasonal predictions with skepticism, mindful of many swing factors and surprises beyond the intuition of even the best and brightest analysts. Focusing instead on the long term, we know the achievement of your goals requires a methodical approach, grounded in realism rather than optimism or pessimism.  We think the start of a new year is a good time to reiterate our core beliefs. These should keep us composed, pragmatic, and opportunistic throughout 2025.

Investing is a marathon, not a sprint.

While 2024 was comparatively calm, there are usually 2-3 meaningful selloffs in a typical stock market year. Recent times have included memorably negative years in 2022 and 2008. Despite occasional trials, stocks have provided marvelous wealth creation over the long haul, amply rewarding the fortitude of disciplined investors.

Patiently own great companies.

Over the long haul, stock prices have paralleled the rising corporate profits and dividends achieved by successful companies. These growth factors are critical in our assessment of businesses. We place our trust in leading companies that provide vital goods and services.

“Time in the Market” is more important than “Market Timing.”

Occasional turbulence makes “market timing” seductive for many investors. However, history shows the futility of timing. Wealth is built and maintained by owning, not by trading.

Be careful about investment risk.

This principle, often ignored in good times, is timely because stock valuations are historically high. Those who forget about risk will eventually face progressively daunting math. Consider that a 10% decline requires an 11% recovery to be made whole, a 20% fall requires a 25% comeback, and a 40% loss must be followed by a 70% gain.

Be prudently diversified.

We think this is a timely reminder following recent years in which stock performance has been dominated by a narrow cohort of exalted companies. Such concentrated glory can tempt “performance chasing” by investors who focus on recent favorites and ignore diversification. This usually ends in sorrow.

Be disciplined in Asset Allocation.

Market declines exact a lasting penalty on those forced to sell stocks at lower prices. Less volatile assets – such as cash, bonds, and alternatives – help protect against this risk. Portfolios should be rebalanced periodically, based on asset allocation guidelines. Discipline helps ensure that market setbacks will not disrupt a sound financial plan. 

Good News

We are pleased to announce the addition of Catherine L. Crawford, CFP® and Brian M. Walker, CFA, as Principals of Bartlett. Catherine joined the company in 2012, and Brian joined in 2019, having earlier worked for Bartlett as a Co-Op student in 2008-2009. Catherine and Brian are thriving as Wealth Advisors, and their success is an example of the careful succession planning that is vital for Bartlett’s future.

Concluding Comments

We are happy to report that Bartlett achieved almost 99% client retention in 2024 and welcomed many new clients. These nice results were made possible by your loyalty and trust. We are always grateful when you recommend us to family, friends, and associates who could benefit from our services. Please also mention Bartlett if you meet a talented young CFP® or CFA who is looking for a great place to make a career.

DISCLOSURE

This material provided by Bartlett Wealth Management (“Bartlett”) is for informational purposes only and is not intended to serve as a substitute for personalized investment advice or as a recommendation or solicitation of any particular security, strategy, or investment product. Nothing in these materials is intended to serve as personalized tax and/or investment advice since the availability and effectiveness of any strategy is dependent upon your individual facts and circumstances. Past performance is not a guarantee of future results. Opinions expressed by Bartlett are based on economic or market conditions at the time this material was written; actual economic or market events may turn out differently than anticipated.  Facts presented have been obtained from sources believed to be reliable.  Bartlett, however, cannot guarantee the accuracy or completeness of such information, and certain information presented here may have been condensed or summarized from its original source.  Any reference to an index is included for illustrative purposes only.  Indices are unmanaged vehicles that serve as market indicators and do not account for the deduction of management fees and/or transaction costs generally associated with investable products.