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Market Commentary January 2025 – Summit Financial Consulting LLC
Reflecting on 2024 and Looking Ahead to 2025
2024 was a great year, and we want to thank you for being a client! We sincerely hope you had a happy holiday season, and we look forward to working together with you in 2025!
Santa Claus Rally: What History Tells Us
As of December 23rd, it has been a negative month for the major stock market indexes. The Russell 2000 is down 7.9%, the Dow Jones is down 4.61%, bonds are down 2.26%, and the S&P 500 is down 1.68%.
Is this a time to panic? Past performance cannot predict future performance, but we do not believe so.
History says the market is positive 77% of the time during the designated Santa Claus Rally time each year and positive in December 83% of the time during a Presidential Election year, so it’s possible we have a nice rally to end the year.
Key Market Indicators for January
There are three indicators that are watched closely by many stock market prognosticators over the next month:
- The Santa Claus Rally (The last five trading days of December and the first two of January)
- The First Five Days of January
- The Month of January
According to the Stock Market Almanac, if all three of those time periods are positive, the stock market for that calendar year has been positive 90% of the time in the past 50 years.
We’ll be watching closely to see how it all plays out because sometimes rules of thumb like this become a self-fulfilling prophecy if enough people follow them.
Market Trends Post-Presidential Election
From 1928-2020, the stock market has typically gone up in the year after a Presidential election when an incumbent party loses.
If the incumbent party lost, the stock market is typically up 8.6%. These numbers are below the historical averages, so the first year of a presidential term is positive on average but not as much as other years.
Market Trends Post-Presidential Election
On January 20th, 2025, Donald J. Trump will be inaugurated. We will initially be focused on tariffs and government spending. There is a chance we will see widespread tariffs or no new tariffs at all if trading partners meet President Trump’s requests.
There is a chance that government spending will be slashed through the new DOGE department, which is a welcome sign since our government spending is completely out of control and, in many ways, wasteful.
The Pentagon recently failed their 7th audit in a row. The US National Debt is going up by $1 Trillion roughly every 100 days, and the average portion of the US National Debt per taxpayer is up to $271,790.
Preparing for 2025: Volatility and Risk Management
If we could make one prediction for the next 12 months, it would be that we will likely have increased volatility in the stock market, both up and down.
This is why we often recommend managed portfolios based upon independent research. Within our managed portfolios, if we believe the market is going to drop, we will reduce risk automatically.
Speak With a Trusted Advisor
If you have any questions about your investment portfolio, retirement planning, tax strategies, our 401(k) recommendation service, or other general questions, please give our office a call at (586) 226-2100. Please feel free to forward this commentary to a friend, family member, or co-worker. If you have had any changes to your income, job, family, health insurance, risk tolerance, or your overall financial situation, please give us a call so we can discuss it.
We hope you learned something today. If you have any feedback or suggestions, we would love to hear them.
Sincerely,
with contributions from Robert Wink, James Wink, Zachary Bachner, James Baldwin, and Daniel Ladzinski
Sources
- https://finance.yahoo.com/quote/%5ERUT/
- https://finance.yahoo.com/quote/AGG/
- https://finance.yahoo.com/quote/%5EDJI/
- https://finance.yahoo.com/news/stock-market-may-verge-santa-050144281.html
- https://finance.yahoo.com/news/investors-hope-santa-claus-rally-110644194.html
- https://www.troweprice.com/financial-intermediary/us/en/insights/articles/2024/q2/how-do-us-elections-affect-stock-market-performance.html
Notes & Disclaimer: Investment advisory services are offered through Summit Financial Consulting LLC, an SEC registered investment advisory firm. Summit Financial Consulting Investment Advisory Firm Representatives do not render tax, legal, or accounting advice. Life/Annuity Insurance products and services offered by the individual insurance agent. Health insurance is offered through Summit Health Services, LLC and Property/Casualty (P&C) Insurance is offered through Summit Insurance Services, LLC and our local P&C agency partners. Please update Summit Financial Consulting LLC, if your investment objectives have changed or if the personal or financial information previously provided has changed. The investment advisory disclosure document that describes Summit Financial Consulting investment advisory services account is provided to you annually, but additional copies are available upon request. Investing involves risk, including the risk of a total loss. Stock market indices, like the S&P 500 Index, are unmanaged groups of securities considered to be representative of the stock market in general or subsets of the market, and their performance is not reflective of the performance of any specific investment. Investments cannot be made directly into an index. Historical returns data are calculated using data provided by sources deemed to be reliable, but no representation or warranty, expressed or implied, is made as to their accuracy, completeness or correctness. Dividends are not included in index returns. This information is provided “AS IS” without any warranty of any kind. Past performance is no guarantee of future results. Representatives of Summit Financial Consulting LLC offer tax preparation services through Summit Tax Services. Summit Tax Services is a DBA of Heemer Klein & Company and they are owned and operated independently.