Chief Investment Officer, Wealth Manager & Principal
The importance of balance as we welcome 2025
Welcome to 2025! As my wife often says, the days are long, but the years are short. There’s something beautiful about winter’s chill balancing with the warmth and sunshine of spring and summer. While I love summer, I’m a winter person. I’ve been skating as long as I can remember and have been on skis since I was three. Winter also means firing up my Ariens snow blower to tackle the snowbanks left by the plows at the end of the driveway.
The last few winters in the Northeast have been milder, and my Ariens has stayed quiet. Yet, even without snow, I know it’s winter—temperatures drop, and the winds chill to the bone. Snow will come again, and when it does, I’ll be prepared. I’m not getting rid of the shovels, ice scraper, or snow blowers. Yes, I have two snow blowers—don’t judge.
Winter is a balancing act and when we invest, we think about balance, too. A lot. Balancing portfolios means rebalancing for risk management, balancing allocations, balancing cash flows, or balancing gains against losses. It’s a constant effort of managing portfolios in all areas.
Lately, markets may seem unbalanced with large-cap and growth equities dominating, but this doesn’t mean other assets like bonds, international stocks, or small caps should be overlooked. Those who say, “this time it’s different” may be the same ones who say, “it’s probably only flurries.”
We need to balance portfolios because no asset class performs well every year. In the middle of a snowstorm, it may feel endless, but when it doesn’t snow, the shovels catch cobwebs. Investment management means being prepared for both stormy and calm times. Maintaining this balance over the long run—whether it’s cold or warm—better positions investors for financial success.
Enough of snow, let’s talk investing:
A stronger-than-expected economy has supported all asset classes.
Expensive stock market valuations underscore the need for portfolio management.
The Fed is expected to cut rates further.
Political focus has shifted from the election to policy.
Long-term thinking will be key to success in 2025 and beyond.
2024 was another strong year for equities, despite concerns about a “hard landing,” recession, market pullbacks, election turmoil, and more. Most of these fears did not materialize, as economic growth remained strong, employment held steady, and companies reported solid earnings. Innovation and a lower interest rate environment provided positive momentum. Large-cap stocks led the way, while small-cap and international equities performed well early in the year.
Mid-summer saw increased volatility as delayed interest rate cuts sparked uncertainty, but the Fed began easing rates in the fall, triggering broad rallies, particularly in small-cap stocks, bonds, international equities, and real estate.
In the fourth quarter, with the presidential election in focus, we continued emphasizing long-term goals. Instead of attempting to time the market, maintaining a well-balanced portfolio for all environments remains the better strategy.
Note in the table below that over the last 25 years, real estate (as represented by the S&P Developed REIT Index) was the best performing asset class, and the performance of small cap equities (Russell 2000 Index) was about equal to large caps. High yield corporate bonds performed better than the aggregate bond index. So much for one asset class being the answer.
Data ending 12/31/2024, (not annualized if less than a year)
Source: DFA Returns Website. See full disclosures.
Indexes are unmanaged, statistical composites, and their returns do not reflect payment of fees an investor would pay to purchase the securities they represent. Such costs would lower performance. It is not possible to invest directly in an index. The indexes include a different number of securities and have different risk characteristics. Past performance of the indexes and benchmark is no indication of future returns.
S&P 500 (TR) – Represents the 500 largest U.S. traded stocks.
MSCI EAFE (TR Net) – Represents mid-cap and large-cap companies in developed markets across the globe.
MSCI Emerging Markets IMI (TR Net) – Represents small, mid-sized, and large companies in emerging market countries.
The MSCI World Real Estate Sector Index is a market capitalization index that tracks the performance of large and mid-cap real estate companies in 23 developed countries.
Bloomberg US Aggregate Bond Index, or the Agg, is a broad base, market capitalization-weighted bond market index representing intermediate term investment grade bonds traded in the United States.
The Bloomberg US Corporate High Yield Index measures the performance of the US dollar-denominated, high-yield, fixed-rate corporate bond market.
The Russell 1000 Growth Index is a gauge of the performance of large-cap US companies with growth characteristics.
The Russell 1000 Index is a U.S. stock market index that tracks the highest-ranking 1,000 stocks in the Russell 3000 Index
The Russell 1000® Value Index measures the performance of the large- cap value segment of the US equity universe.
The Russell 2000® Growth Index measures the performance of the smallcap growth segment of the US equity universe.
The Russell 2000 Index® measures the performance of the 2,000 smallest companies in the Russell 3000 Index.
The Russell 2000® Value Index measures the performance of the smallcap value segment of the US equity universe.
Modera Wealth Management, LLC (“Modera”) is an SEC registered investment adviser. SEC registration does not imply any level of skill or training. Modera may only transact business in those states in which it is notice filed or qualifies for an exemption or exclusion from notice filing requirements. For information pertaining to Modera’s registration status, its fees and services please contact Modera or refer to the Investment Adviser Public Disclosure Web site (www.adviserinfo.sec.gov) for a copy of our Disclosure Brochure which appears as Part 2A of Form ADV. Please read the Disclosure Brochure carefully before you invest or send money.
This article is limited to the dissemination of general information about Modera’s investment advisory and financial planning services that is not suitable for everyone. Nothing herein should be interpreted or construed as investment advice nor as legal, tax or accounting advice nor as personalized financial planning, tax planning or wealth management advice. For legal, tax and accounting-related matters, we recommend you seek the advice of a qualified attorney or accountant. This article is not a substitute for personalized investment or financial planning from Modera. There is no guarantee that the views and opinions expressed herein will come to pass, and the information herein should not be considered a solicitation to engage in a particular investment or financial planning strategy. The statements and opinions expressed in this article are subject to change without notice based on changes in the law and other conditions.
Investing in the markets involves gains and losses and may not be suitable for all investors. Information herein is subject to change without notice and should not be considered a solicitation to buy or sell any security or to engage in a particular investment or financial planning strategy. Individual client asset allocations and investment strategies differ based on varying degrees of diversification and other factors. Diversification does not guarantee a profit or guarantee against a loss.
Certified Financial Planner Board of Standards, Inc. (CFP Board) owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER®, and CFP® (with plaque design) in the United States, which it authorizes use of by individuals who successfully complete CFP Board’s initial and ongoing certification requirements.
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Investment Commentary: Q4 2024
George Padula
Chief Investment Officer, Wealth Manager & Principal
The importance of balance as we welcome 2025
Welcome to 2025! As my wife often says, the days are long, but the years are short. There’s something beautiful about winter’s chill balancing with the warmth and sunshine of spring and summer. While I love summer, I’m a winter person. I’ve been skating as long as I can remember and have been on skis since I was three. Winter also means firing up my Ariens snow blower to tackle the snowbanks left by the plows at the end of the driveway.
The last few winters in the Northeast have been milder, and my Ariens has stayed quiet. Yet, even without snow, I know it’s winter—temperatures drop, and the winds chill to the bone. Snow will come again, and when it does, I’ll be prepared. I’m not getting rid of the shovels, ice scraper, or snow blowers. Yes, I have two snow blowers—don’t judge.
Winter is a balancing act and when we invest, we think about balance, too. A lot. Balancing portfolios means rebalancing for risk management, balancing allocations, balancing cash flows, or balancing gains against losses. It’s a constant effort of managing portfolios in all areas.
Lately, markets may seem unbalanced with large-cap and growth equities dominating, but this doesn’t mean other assets like bonds, international stocks, or small caps should be overlooked. Those who say, “this time it’s different” may be the same ones who say, “it’s probably only flurries.”
We need to balance portfolios because no asset class performs well every year. In the middle of a snowstorm, it may feel endless, but when it doesn’t snow, the shovels catch cobwebs. Investment management means being prepared for both stormy and calm times. Maintaining this balance over the long run—whether it’s cold or warm—better positions investors for financial success.
Enough of snow, let’s talk investing:
2024 was another strong year for equities, despite concerns about a “hard landing,” recession, market pullbacks, election turmoil, and more. Most of these fears did not materialize, as economic growth remained strong, employment held steady, and companies reported solid earnings. Innovation and a lower interest rate environment provided positive momentum. Large-cap stocks led the way, while small-cap and international equities performed well early in the year.
Mid-summer saw increased volatility as delayed interest rate cuts sparked uncertainty, but the Fed began easing rates in the fall, triggering broad rallies, particularly in small-cap stocks, bonds, international equities, and real estate.
In the fourth quarter, with the presidential election in focus, we continued emphasizing long-term goals. Instead of attempting to time the market, maintaining a well-balanced portfolio for all environments remains the better strategy.
Note in the table below that over the last 25 years, real estate (as represented by the S&P Developed REIT Index) was the best performing asset class, and the performance of small cap equities (Russell 2000 Index) was about equal to large caps. High yield corporate bonds performed better than the aggregate bond index. So much for one asset class being the answer.
Data ending 12/31/2024, (not annualized if less than a year)
Source: DFA Returns Website. See full disclosures.
1 https://www.wsj.com/livecoverage/fed-interest-rate-cut-inflation-live-09-18-2024/card/powell-doesn-t-see-elevated-likelihood-of-economic-downturn-2VNfUN7jUuZ7z6O8cfTA
YCharts ©2024 YCharts, Inc. All rights reserved. The information contained herein: (1) is proprietary to YCharts, Inc. and/or its content providers; (2) may not be copied, reproduced, retransmitted, or distributed; and (3) is provided AS IS with all faults and is not warranted to be accurate, complete, or timely. YCHARTS, INC. AND ITS CONTENT PROVIDERS EXPRESSLY DISCLAIM, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY WARRANTY OF ANY KIND, WHETHER EXPRESS OR IMPLIED, INCLUDING WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, ACCURACY OF INFORMATIONAL CONTENT, OR ANY IMPLIED WARRANTIES ARISING OUT OF COURSE OF DEALING OR COURSE OF PERFORMANCE. Neither YCharts, Inc. nor its content providers are responsible for any damages or losses arising from the use of this information. Past performance is no guarantee of future results. YCharts, Inc. (YCharts) is not registered with the U.S. Securities and Exchange Commission (or with the securities regulatory authority or body of any state or any other jurisdiction) as an investment adviser, broker-dealer or in any other capacity, and does not purport to provide investment advice or make investment recommendations. This report has been generated through the application of the analytical tools and data provided through ycharts.com and is intended solely to assist you or your investment or other adviser(s) in conducting investment research. You should not construe this report as an offer to buy or sell, as a solicitation of an offer to buy or sell, or as a recommendation to buy, sell, hold or trade, any security or other financial instrument. For further information regarding your use of this report, please go to: ycharts.com/about/disclosure.
Indexes are unmanaged, statistical composites, and their returns do not reflect payment of fees an investor would pay to purchase the securities they represent. Such costs would lower performance. It is not possible to invest directly in an index. The indexes include a different number of securities and have different risk characteristics. Past performance of the indexes and benchmark is no indication of future returns.
S&P 500 (TR) – Represents the 500 largest U.S. traded stocks.
MSCI EAFE (TR Net) – Represents mid-cap and large-cap companies in developed markets across the globe.
MSCI Emerging Markets IMI (TR Net) – Represents small, mid-sized, and large companies in emerging market countries.
The MSCI World Real Estate Sector Index is a market capitalization index that tracks the performance of large and mid-cap real estate companies in 23 developed countries.
Bloomberg US Aggregate Bond Index, or the Agg, is a broad base, market capitalization-weighted bond market index representing intermediate term investment grade bonds traded in the United States.
The Bloomberg US Corporate High Yield Index measures the performance of the US dollar-denominated, high-yield, fixed-rate corporate bond market.
The Russell 1000 Growth Index is a gauge of the performance of large-cap US companies with growth characteristics.
The Russell 1000 Index is a U.S. stock market index that tracks the highest-ranking 1,000 stocks in the Russell 3000 Index
The Russell 1000® Value Index measures the performance of the large- cap value segment of the US equity universe.
The Russell 2000® Growth Index measures the performance of the smallcap growth segment of the US equity universe.
The Russell 2000 Index® measures the performance of the 2,000 smallest companies in the Russell 3000 Index.
The Russell 2000® Value Index measures the performance of the smallcap value segment of the US equity universe.
Modera Wealth Management, LLC (“Modera”) is an SEC registered investment adviser. SEC registration does not imply any level of skill or training. Modera may only transact business in those states in which it is notice filed or qualifies for an exemption or exclusion from notice filing requirements. For information pertaining to Modera’s registration status, its fees and services please contact Modera or refer to the Investment Adviser Public Disclosure Web site (www.adviserinfo.sec.gov) for a copy of our Disclosure Brochure which appears as Part 2A of Form ADV. Please read the Disclosure Brochure carefully before you invest or send money.
This article is limited to the dissemination of general information about Modera’s investment advisory and financial planning services that is not suitable for everyone. Nothing herein should be interpreted or construed as investment advice nor as legal, tax or accounting advice nor as personalized financial planning, tax planning or wealth management advice. For legal, tax and accounting-related matters, we recommend you seek the advice of a qualified attorney or accountant. This article is not a substitute for personalized investment or financial planning from Modera. There is no guarantee that the views and opinions expressed herein will come to pass, and the information herein should not be considered a solicitation to engage in a particular investment or financial planning strategy. The statements and opinions expressed in this article are subject to change without notice based on changes in the law and other conditions.
Investing in the markets involves gains and losses and may not be suitable for all investors. Information herein is subject to change without notice and should not be considered a solicitation to buy or sell any security or to engage in a particular investment or financial planning strategy. Individual client asset allocations and investment strategies differ based on varying degrees of diversification and other factors. Diversification does not guarantee a profit or guarantee against a loss.
Certified Financial Planner Board of Standards, Inc. (CFP Board) owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER®, and CFP® (with plaque design) in the United States, which it authorizes use of by individuals who successfully complete CFP Board’s initial and ongoing certification requirements.
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