Market Overview Analysis by Lance Roberts covering: S&P 500. Read Lance Roberts's latest article on Investing.com
as we progress into 2025. While we have remained primarily bullish in equity positioning over the last two years, several risks are now worth considering.and have held more significant weightings in equities that have benefitted from market momentum and investor sentiment. However, shifting toward aposition would suggest rebalancing exposure to more fundamental, value-oriented, dividend-paying companies that will reduce overall portfolio volatility.
This leaves little room for error. In other words, investors are essentially betting on corporations’ flawless execution in a year when macroeconomic uncertainties loom large. Given that higher borrowing costs divert income into debt service, the negative impact on businesses is evident in an economy and financial market supported by rising debt levels. Over the last two years, corporate bankruptcies have increased sharply as borrowing costs have risen..” This is why credit spreads, as shown above, are an important leading indicator of market risk.
The good news is that during economic and earnings contraction periods, yields fall substantially as the markets are repriced to a new reality. Such eventually provides the base for the next bull market cycle.The following chart has provided a strong basis for our portfolio risk-management protocols over the years. It is a weekly price chart of theshowing the current bullish price trend channel that started in 2009 on a logarithmic scale.
“Our job as investors is to navigate the waters within which we currently sail, not the waters we think we will sail in later. If there are no absolutes, all decisions become matters of judging the probability of different outcomes, and the costs and benefits of each. Then, on that basis, you can make a good decision.’”For all of these reasons, we are becoming more “tactically bearish” as we ponder the outcomes of 2025. It should be evident that an honest assessment of uncertainty leads to better decisions. Still, the benefits of Rubin’s approach, and ours, go beyond that.
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