Skip to main content
News

Obermeyer Wealth News | Winter 2025

By January 8, 2025No Comments

Obermeyer Wealth News | Winter 2025

Marketpoint: Broadening Markets, Changing Policies 2025

As we close the books on 2024, we reflect on a year marked by remarkable market resilience, technological advancement, and economic strength. The MSCI All Country Index rose 18%, posting its fourth double-digit return in six years, an impressive feat achieved amid elevated interest rates and ongoing global uncertainties. While these results are encouraging, we maintain a balanced perspective as we evaluate opportunities and risks in the year ahead.

Markets: Strength, Concentration, and Evolution

The U.S. equity markets demonstrated continued absolute and relative strength in 2024, with gains extending across sectors but remaining concentrated among key players. The “Magnificent 7” technology stocks accounted for roughly 58% of the S&P 500’s annual gains, reflecting both their dominant market positions and strong earnings growth.[1] These companies posted aggregate earnings growth of nearly 40% this year, compared with more modest gains for the broader market.[2] This concentration of returns, while impressive, has led to stretched valuations in certain sectors, with the S&P 500 trading at 22 times forward earnings, well above its historical average of 18 times.

The Treasury yield curve evolved significantly throughout the year, with the 10-year Treasury yield ending 2024 around 4.6%, just under its peak for the year, while the 2-year settled around 4.3%, reflecting the Fed’s shift toward a more accommodative stance. Shorter-term yields dropped faster than longer-term yields as a soft landing became more likely toward the second half of the year. And despite periods of volatility, fixed-income markets provided opportunities for investors seeking yield, particularly in shorter-duration securities.

Economy and Federal Reserve: Threading the Needle

The U.S. economy showed resilience in 2024, growing at 2.5% despite persistent elevated interest rates. This growth was supported by robust consumer spending and a healthy labor market, with unemployment ending the year slightly elevated from the prior year at 4.2%. Corporate profitability remained strong, with S&P 500 companies posting record quarterly earnings of $62.10 per share in Q3, supported by net profit margins exceeding 12%.[3]

The Federal Reserve’s December meeting marked a pivotal moment for markets, as the central bank signaled a more measured approach to rate cuts than markets initially anticipated. Its upward revision to inflation projections and an indication of just two potential rate cuts (as opposed to the four previously expected) in 2025 triggered market volatility, raising questions about the Fed’s assessment of economic conditions and potential policy impacts from the new administration. However, with inflation moderating to 2.7% (see chart below) and showing a clear downward trend from its 2022 peak, the Fed maintains flexibility to adjust policy as needed.

Our Portfolio Strategy: Quality, Innovation, and Opportunity

Our investment approach remains grounded in identifying high-quality companies with strong balance sheets, consistent cash flows, durable competitive advantages, and reasonable valuations. The rapid advancement of artificial intelligence has created opportunities across sectors, particularly in companies effectively implementing AI to enhance operations and drive margin expansion. We’ve identified several key areas of focus:

  1. Technology and Innovation: Beyond the headline tech names, we’re finding opportunities in companies across sectors deploying AI and automation to improve efficiency and competitive positioning. Semiconductor manufacturers and designers remain critical to the AI ecosystem, while enterprise software companies are positioned to benefit from increased corporate technology spending.
  2. Healthcare Evolution: The expansion of GLP-1 drugs represents a potential transformation in healthcare delivery, creating opportunities not only in pharmaceutical companies but across the healthcare ecosystem. This innovation could reshape healthcare economics, benefiting companies focused on preventative care and healthcare cost management.
  3. Infrastructure and Industrial Innovation: Companies leveraging technology to enhance traditional business models, particularly in areas benefiting from public and private infrastructure spending, present compelling opportunities. We’re seeing increased adoption of AI-driven solutions in agricultural equipment, manufacturing, and logistics.

Looking Ahead: Opportunities and Risks for 2025

As we look toward 2025, several interconnected factors could shape the investment landscape. The political environment following the November election introduces both opportunities and uncertainties for markets. The new administration’s proposed fiscal policies, particularly around corporate tax rates and regulatory reform, could meaningfully impact corporate earnings and market sentiment toward the upside. While potential deregulation might benefit sectors like energy and financials, the administration’s strong stance on trade policy, especially regarding China and Mexico, warrants careful monitoring. Discussions of potential new tariffs, including floated levies of up to 60% on Chinese imports in certain sectors, represent a meaningful risk to global trade flows and the fight against inflation.[4] Any escalation in trade tensions could disrupt global supply chains and impact corporate profitability.

The Federal Reserve’s monetary policy decisions will remain a crucial market driver. While markets anticipate further rate cuts in 2025, the Fed’s December communication suggested a more measured approach than initially expected. The committee appears particularly focused on the potential inflationary impact of fiscal policy changes and the surprising resilience of consumer spending. Its commitment to data dependency means the path and pace of rate cuts could shift significantly based on incoming economic data, potentially creating both opportunities and challenges for rate-sensitive sectors.

Meanwhile, the global economic outlook appears relatively stable, with forecasts suggesting none of the Top 10 countries in the global economy will enter recession in 2025 – a notably positive backdrop for markets.[5] However, this stability could be tested by ongoing geopolitical tensions and the persistent strength of the U.S. dollar. The dollar’s continued dominance has implications for international trade, emerging market debt, and U.S. corporate earnings from overseas operations. Additionally, unresolved conflicts in several regions could create periodic market volatility and impact commodity prices, particularly in the energy sector.

Turning to the outlook for equities, corporate earnings growth is expected to broaden beyond the dominant technology sector in 2025, with analyst consensus projecting 13% growth for non-Magnificent 7 companies. This expansion of earnings power could support the market’s current valuations and potentially drive more balanced market performance. However, investors should maintain measured return expectations with the S&P 500 trading above historical averages. Notably, the valuation gap between the market’s most and least expensive stocks has exceeded 90% of all observations over the past 28 years.[6] While this dispersion could lead to increased index-level volatility, it can also present attractive opportunities for active investors in individual stocks, particularly as earnings growth broadens across sectors. Companies must deliver on earnings projections to justify current valuations, particularly in sectors where expectations for AI adoption and margin expansion are already priced in.

Our Commitment

We maintain our disciplined approach to portfolio management, focusing on quality companies while remaining alert to both risks and opportunities. Historical data suggest that after two consecutive years of 20%+ gains, general stock prices have advanced further two-thirds of the time.[7] However, we recognize that past performance does not guarantee future results.

While the path ahead may present challenges, our investment philosophy remains unchanged: to focus on quality and be disciplined with valuations, maintain appropriate diversification, and stay committed to long-term strategies aligned with each client’s specific circumstances. Your trust and support have been invaluable to us, and we are deeply grateful for your confidence in our team. We look forward to approaching 2025 with the same client-first mentality we have now employed for over 40 years, and we are grateful to be able to deepen our relationship with you.

Sources:

[1] https://www.cnbc.com/2024/12/31/magnificent-7-stocks-responsible-for-more-than-half-of-the-sp-500s-2024-gain.html
[2] https://am.jpmorgan.com/content/dam/jpm-am-aem/global/en/insights/eye-on-the-market/the-alchemists-amv.pdf
[3] Bloomberg and FactSet Data
[4] https://www.bloomberg.com/news/articles/2024-02-04/trump-floats-chinese-goods-tariff-of-more-than-60-if-elected
[5] https://www.goldmansachs.com/insights/articles/the-global-economy-is-forecast-to-grow-solidly-in-2025
[6] JP Morgan Guide to Markets, January 2 2025
[7] https://www.carsongroup.com/insights/blog/what-happens-after-back-to-back-20-gains/


Obermeyer Wealth Partners: Building on Four Decades of History

We are excited to enter our new chapter as Obermeyer Wealth Partners, marking an exciting progression in our 40-plus-year journey of stewarding client wealth.

This name evolution reflects the natural progression of our firm. Over the years, we have expanded beyond investment management to provide integrated wealth management and financial planning. Our disciplined, independent approach to managing investments remains our core focus, ensuring clients’ wealth is carefully stewarded for generations to come.

Our story, which began with George Wood’s pioneering spirit in 1982, continues to inspire innovation. The partnership formed with Wally Obermeyer in 2014 amplified our capabilities, and today, we’re poised to embrace the coming decades as we continue to grow and evolve.

While our name has changed, the foundational principles we have used to help clients over the years remain the same: independent thinking, disciplined investment management, best-in-class financial planning, and deep client relationships.

Looking forward to the future, we’re energized by the possibilities to serve our clients even better. Our new website – www.obermeyerwealth.com – showcases our expanded capabilities while honoring the timeless principles that have guided us for more than four decades.


PERSONAL FINANCE

Empowered in 2025: Financial Planning in the New Year

The start of a new year is the perfect time to evaluate your financial health and set resolutions that align with your long-term wealth-building goals. By setting clear goals, preparing for tax season, and staying informed, you can build a stronger foundation for long-term financial success. Below are five suggested tasks to start checking off your to-do list as you map out your overall financial plan for 2025. Happy New Year!

Set clear financial goals: Start by defining your financial priorities for the year ahead and beyond. Are you saving for a home, retirement, or your children’s or grandchildren’s education? Do you want to pay off debt, open a Donor-Advised Fund, or review and adjust your overall asset allocation? Use the “SMART” framework while writing down your goals to ensure they are Specific, Measurable, Achievable, Relevant, and Time-bound. For example, instead of saying “I want to save more for retirement,” reframe your goal as “starting this week, I will contribute 15% of my monthly income to my 401(k) and make sure I’m maximizing my employer-matched contributions.”

Review and update your beneficiary designations: The beneficiary designations on your retirement accounts, life insurance policies, annuities, and more might be out of date, so be sure to review and update them if needed. Our team can help you with this important part of your overall estate planning.

Get ready for tax season: Your tax advisor can help you identify deductions, credits, and strategies to minimize your tax liability. Consider making charitable donations through Qualified Charitable Donations or a Donor-Advised Fund, for example, or opening a health savings account (HSA). As you start gathering documents in preparation for tax season, remember that our team is on hand to coordinate directly with your tax professionals. Please reach out if you haven’t already authorized us to provide them with tax documents such as your Forms 1099(s) automatically every tax season. We can also provide income estimates and capital gain and loss updates during the year to help you calculate your quarterly estimated tax payments.

Maximize your retirement contributions: Planning for retirement is likely to be a top priority in your overall wealth strategy. In 2025, resolve to contribute the maximum allowable amounts to your 401(k)s and IRAs. Make sure you are taking full advantage of tax-advantaged retirement contributions to traditional and Roth IRA accounts, as well as any matching contributions to your 401(k) from your employer.

Boost Your Financial Literacy: The more you know, the better equipped you will be to make informed decisions when it comes to your personal finances. Dedicate time in 2025 to enhance your financial literacy. Our financial planning team is available to review your personal finances and help you work toward your specific goals. We will also let you know of upcoming virtual events and book offers to help you on your journey.

Our team is committed to serving as your financial quarterback and keeping an eye on your entire financial picture, not just your investments. Please reach out for assistance or to schedule a quick call, Zoom or in-person meeting with your advisor.


FIRM UPDATES

AWARDS

Forbes: Top RIA Firms 2024

Obermeyer Wealth Partners rose in the rankings of this year’s Forbes/SHOOK Top RIA List, to No. 21 out of 250 registered investment advisory firms in the United States. In its announcement of the winners, Forbes and SHOOK Research highlighted that the winners “have strong track records when it comes to stewarding client wealth and preserving it for the long term.”

CNBC: FA 100 2024

Obermeyer Wealth Partners came in at No. 23 on CNBC’s highly regarded Financial Advisor 100 ranking for the second year in a row. This recognition highlights CNBC’s in-depth evaluation of the nation’s top independent advisory firms, going beyond assets under management to assess factors like regulatory history, areas of specialization, and employee expertise. CNBC particularly values firms that help clients navigate complex financial decisions beyond their investment portfolios.

“Our clients rely on us for more than just portfolio management—they look to us for holistic financial guidance,” said Ali Phillips, President and Partner at Obermeyer Wood. “We are proud to stand by them as trusted partners through all of life’s important decisions. We think awards such as this highlight this type of approach, and we are proud to work with so many wonderful, long-time clients.”

We extend our heartfelt thanks to our clients, whose trust allows us to earn these accolades. Please review important disclosures about third-party rankings and their methodologies.

OBERMEYER ON THE AIR

CNBC’s “Closing Bell”

A familiar face has become a featured guest on CNBC’s “Closing Bell,” where Ali Phillips joined host Scott Wapner in recent discussions of opportunities in the equities market (October), why the post-election stock market pullback was natural (November), and the economy, Federal Reserve remarks, and earnings outlook (December). We are grateful to CNBC for hosting our firm as we are learning great insights from these panels. Stay tuned for more appearances!

New Partner: Charlton Rugg

Charlton Rugg, Chief Compliance, Legal, and Technology Officer, is now the firm’s newest partner. He joined our Executive Committee earlier this year as one of the day-to-day managers of the firm and is responsible for overseeing much of our infrastructure and systems. Charlton embodies our core values: Integrity, Perseverance, Humility, Grace, Empowerment, Ingenuity, Team Over Individual, and Thive; we are excited to celebrate his expanding leadership role.