2024 was a crazy year, but isn’t every year crazy now? Bitcoin mania has returned, US growth stocks “grew” to even loftier multiples, non-US equities once again trailed behind, people learned how to pronounce “Nvidia”, and the Fed cutting interest rates has apparently sent rates higher.
There was much more to 2024 than financial markets, such as:
It was another successful year for Meredith Wealth Planning. Today we serve close to 200 client households, manage over $330 million of client assets, and advise on another $20 - $30 million.
Evidently the firm’s footprint is expanding as we now serve clients in 18 different states, and many of the firm’s new clients are from outside of our geographic area. I believe the service we offer at the price we offer it continues to be unique, and people seeking that out are finding us.
Scott Wimmer has now been with the firm for 2 years and continues to do great work for all of the new clients of the firm.
I am thankful for all of the readers of this blog and clients that we serve.
We are officially a family of 6, and my wife jokes that we are now considered a “large party with automatic 20% gratuity” at restaurants (yes that happened to us).
We brought home this little angel in April, who was nearly born in my wife’s car (fun times!). She’s doing great, and the big kids have been very good to her.
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As I write this on December 30th, 2024 I calculate that the Vanguard Total World Stock Index is up 33.5% (not counting dividends!) since March 10th, 2023, which was the day that Silicon Valley Bank failed. Two other major bank failures followed but everyone has long forgotten about that.
2024 was a very calm year for US equity markets and the only real blip we saw was at the end of July/early August where the S&P fell about 8.5% from top to bottom. There is nothing unordinary about that decline, because a drop of that magnitude happens nearly every single year. But it was enough for the fear mongerers to hop on social media and say a repeat of 2008 was coming.
Further, Presidential elections seems to make some investors uneasy, but once again the immediate impact on markets after the election was a bit of a nothing burger. After a post election spike to equities, markets have already given back some of those gains.
The sooner an investor can accept that no one can predict the future and that markets have a long history of rewarding the patient, calm investor, the better off they will likely be.
For the 10th year out of the last 12, it looks like international equities will once again lag behind US equity performance, and this year it has been rather significant. Below is the comparison of US equity markets this year to non-US equity markets.
01/01/2024 – 12/27/2024:
Now let's zoom out to the most recent 10 year period starting in 2015 (ending 12/27/2024 once again):
Here we see that US has beaten Non-US by over 8% annualized and an investor would have ended up with twice as much wealth over that nearly 10 year period had they simply ignored the rest of the world existed outside of the US.
It's only reasonable at this point an investor would ask why would they own anything except US equities?
Let’s go back as far as we can on Non-US equities, which is 01/01/1970 (using data from the MSCI World Ex USA Index). We will just use an ending date of 12/31/2010. Here we see Non-US equities outperforming US for more than a 40 year period. So up until 2011, non-US equities returned about the same as US.
During that period there were waves where US outperformed non-US and vice versa. Predicting what will do better when and for how long is not a viable approach. Having exposure to global markets can reduce risk while maintaining a similar long-term expected return.
Let’s look at a few more cases for diversifying globally. Below we will look at the period from 1970 – 1988:
Here we see that someone who simply concentrated their entire portfolio in Japan has grew $1 to $60.57 by the end of the period, whereas $1 invested in US equities only grew to $6.77. Had you been around as an investor in 1988 and looked at recent history, you might be asking why you would own anything except Japanese equities.
Let’s see how Japan did in the subsequent several decades after that, below is 1989 - 2019:
Yikes. Japanese equities went on to earn less than 1% annually over 30 years. It is best to stay diversified. What happened to Japan’s market performance could always happen to the US or any other country.
The price of a Bitcoin rose over 100% so far in 2024. Here are Bitcoin’s annual returns by calendar year going back to 2013.
Bitcoin’s 2024 performance is not indicative of the broader cryptocurrency market. Ethereum, the second largest cryptocurrency, is still more than 30% below its 2021 peak.
According to www.coingecko.com there are over 16,000 different cryptocurrencies today with a total market cap of $3.36 trillion. Bitcoin is over 54% of the entire crypto market cap at $1.82 trillion. Back in November of 2021, Bitcoin's market cap stood at $1.27 trillion and the entire crypto industry was $3.069 trillion. So in the last 3 years we have seen the entire crypto market cap increase by $300 billion, while Bitcoin's market cap increased by $550 billion in itself. This means that the entire industry ex-Bitcoin has actually shrunk in terms of market cap.
The proposed utility and cryptography behind cryptocurrencies intriguing and promising, so far I have not seen much usage for those proposed cases or many things being delivered in that regard. The sentiment seems to have shifted over the years that Bitcoin should be viewed as a "store of value", which is actually not mentioned anywhere in the original whitepaper by Satoshi.
On one hand Bitcoin has produced substantially positive real returns throughout its history with very low correlation to traditional assets (like stocks and bonds), making it an ideal fit for diversification in a portfolio. On the other hand, Bitcoin has no underlying dividends, interest, or cash flows making it extremely difficult to place a fair value on it (similar to gold).
Since the Federal Reserve Bank started their rate cutting cycle in September of this year, we have seen a 30-year mortgage rate jump from 6.11% to 7.14%:
The Fed has cut rates a total of 1% and the 30-year mortgage has increased over 1%, so what is going on? The Fed only sets the Federal Funds Rate, which is the rate that US banks pay one another to borrow or loan money overnight. Mortgage rates are often priced as a spread over the 10 Year US Treasury rate which is set by market participants based on their future estimates of economic conditions and inflation. Therefore the Fed does not have much control over the long-term rates.
One explanation might be that rates dropped a bit too much prior to the first Fed cut and once the market realized that there would not be as many interest rate cuts as initially believed that things had to readjust upwards accordingly.
Of course there is nothing that could top bringing home another family member, but outside of that here were a few of my favorite moments in 2024:
Cheers to 2025!
Disclosures: This article is for informational purposes only and should not be considered a recommendation. Information contained in this article is obtained from third party resources that Meredith Wealth Planning deems to be reliable. Consult with a financial advisor before implementing any strategies. Past performance does not equal future results. Meredith Wealth Planning does not guarantee any minimum level of investment performance or the success of any index portfolio, index, mutual fund or investment strategy. You cannot invest directly into an index, and index returns do not account for real life fees and transaction costs.
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