Previewing Clearwater Capital’s Outlook 2025

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Previewing Clearwater Capital’s Outlook 2025

In 2024, the S&P 500 experienced a remarkable rise of over 23% and delivered a total return of 25%.  This was a year punctuated by 57 record highs, marking it as the fifth most prolific year for records since 1957, all without a single correction reaching 10%.  Central to this impressive performance were the "Magnificent Seven," a group of influential stocks that fueled roughly half of the gains.  Their leadership was propelled by investments and optimism surrounding artificial intelligence, which bolstered large-cap and growth stocks.

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December Private Client Letter

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December Private Client Letter

Recession fears have eased significantly since the summer, driving renewed investor confidence and a surging stock market. The S&P 500 gained 5.7% in November as the Index delivered its best monthly return in a year and ninth winning month out of 11. With the national elections now concluded, stocks benefited from steady economic and earnings growth and the anticipation for pro-growth policies emerging from Trump’s second term in office. Small cap stocks did particularly well in November as the Russell 2000 rallied 10.8% on anticipation of tax cuts and trade policy that favors domestic producers.

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Private Client Letter | Special Post-Election Edition

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Private Client Letter | Special Post-Election Edition

It has been two weeks since the national election and many of the inferences of a second Trump presidency are beginning to come into focus.  With Republicans about to take control of the White House, the Senate, and the House of Representatives we can expect sweeping changes to many important policies impacting the future trajectory of the economy.

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November Private Client Letter

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November Private Client Letter

Thankfully, we have come to the end of a particularly contentious political season in which rival campaigns each suggested that the other side will hasten the end of the republic.  Today, the swing states will again decide the election outcome.  While most attention has been focused on Pennsylvania, other key swing states that matter include Arizona, Nevada, Wisconsin, Michigan, North Carolina, and Georgia.

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August Private Client Letter: Economic and Market Narratives are Shifting Quickly

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August Private Client Letter: Economic and Market Narratives are Shifting Quickly

We are only a few trading days into the month of August and already it feels like an entirely different environment compared to the one we have enjoyed for most of the year.  While economic reports have been flashing signs of inflation for many months, the equity markets have spent most of the year ascending to new record highs. 

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2024 Mid Year Update

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2024 Mid Year Update

We are pleased to share with you the Clearwater Capital Partners Outlook 2024 Mid-Year Update report entitled:

“Bulls, Bears, and Blurred Horizons”

Exactly two years ago the rate of inflation peaked at a year-over-year rate of 9.1%. The Federal Reserve responded to the spike in consumer prices by raising interest rates 11 consecutive times over a period of just 16 months. The Fed’s pursuit of tighter financial conditions was meant to bring the rate of inflation down to a 2% target level – a goal that remains elusive with prices continuing to rise at a pace of about 3.3%.

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June Private Client Letter

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June Private Client Letter

As I have repeatedly observed, the rate of inflation has been the dominant economic story of the year.  Consumer prices are now about 20% higher than they were when inflation began to heat up and, while the rate of continuing inflation has fallen from peak levels experienced in the summer of 2022, it remains well above the Fed’s 2% target and continues to pressure consumers.

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March Private Client Letter

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March Private Client Letter

Equity markets in the U.S. continue to press higher.  Less than a month ago, the S&P 500 crossed 5,000 for the first time in its history and since the low last October, the index has been up over 1,000 points.  Semiconductor manufacturer Nvidia reported a blowout fourth quarter earnings report and optimism over artificial intelligence keeps pushing stock indices to all-time highs.

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December Private Client Letter

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December Private Client Letter

As 2023 draws to a close, I am encouraged to observe that the year has turned out much better than many, including myself, had expected.  The economic slowdown, signaled by several traditional indicators such as the Leading Economic Index (LEI), has not yet materialized.  In fact, the third quarter growth in GDP far exceeded expectations and an increasing number of market strategists are shifting their perspectives to a “soft-landing scenario” in which the Federal Reserve’s aggressive and historic tightening cycle will succeed in reducing inflation without crushing the economy.

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November 2023 Private Client Letter

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November 2023 Private Client Letter

In late October both the Nasdaq and S&P 500 entered correction territory following a weak third quarter for equity prices.  The reasons behind falling stock prices have been higher interest rates and weak earnings guidance from corporate executives worried about the threat of an escalation to the war in the Middle East.  By the end of the month, the S&P 500 closed about 10% below its recent peak in late July. 

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October Private Client Letter

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October Private Client Letter

Over the past several months I have warned of potential weakness in equities following a rally earlier in the year that saw the S&P 500 rise by as much as 20% from the beginning of the year.  It appeared that valuations were being stretched as the market breadth narrowed.  In other words, equity prices were rising faster than corporate earnings and the gains had become dominated by only a handful of mega cap names in the communication and information technology sectors. 

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September Private Client Letter

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September Private Client Letter

With another summer winding down and kids heading back to school, we are entering the month of September with a bit of trepidation.  Not only have U.S. equities rallied this year against the backdrop of declining earnings, but September has also historically been the worst month of the year for stocks.  If investors could choose to skip past any month based on the historical action, September would be it.

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What to Make of This Year’s Equity Rally

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What to Make of This Year’s Equity Rally

Following the most aggressive monetary tightening cycle in the past 40 years, stock prices are approaching the threshold of a new bull market - rising almost 20% from the bear market low last October.  A cursory look at U.S. equity price movement so far in 2023 would suggest that stocks have been able to shrug off a wide range of troubling issues.

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May Private Client Letter - Sell in May and Go Away?

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May Private Client Letter - Sell in May and Go Away?

The Federal Reserve and Chairman Jerome Powell will hold its latest policy meeting on Wednesday, May 3rd.  The central bank is largely expected to deliver on another 25-basis point hike to the Fed Funds rate, bringing the benchmark rate to a range of 5.00% - 5.25%.   This would mark the 10th straight rate hike this cycle and take the Fed Funds rate to its highest level since 2007.  

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April Private Client Letter - Recession Risks Continue to Rise

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April Private Client Letter - Recession Risks Continue to Rise

The most significant challenge for the U.S. economy has shifted from an uncertain path for monetary policy to a potential banking crisis and associated issues connected with tightening credit conditions. 

The supply of bank credit is an important driver of macroeconomic outcomes and a contraction in credit availability serves to further slow already decelerating economic activity.  Banks will likely raise lending standards in response to the current set of problems and the pace of new loan origination, for businesses and consumers alike, will decline.  

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