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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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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November Private Client Letter - A Complicated and Shifting Environment

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November Private Client Letter - A Complicated and Shifting Environment

We have long promised our clients that when the facts change, our outlook would change. This said, our base case has shifted to a less constructive view of the economy over the next 12 to 18 months. We now expect that economic growth to disappoint and a recession to occur 2023. This said, we are not expecting the recession to be particularly long or deep. By mid-2023 the worst may be behind us, and risk assets could begin a sustained move higher.

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July Private Client Letter

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July Private Client Letter

The S&P 500 suffered its worst half since 1970 after inflation and recession concerns sparked a 21% sell-off. This year’s first half performance was strikingly similar to that of 1970 (also down -21%) and in both periods, high inflation was the issue. It is interesting to note that the second half of 1970 saw the S&P up 27%. Of course, that does not mean that's how it will go for the back half of 2022; however, we believe it is likely the market will move higher if inflationary pressures subside.

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Inflation on All Fronts

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Inflation on All Fronts

Inflation is a monetary phenomenon and in the short term can be affected by supply/demand dynamics. The Investment Policy Committee of Clearwater Capital has written extensively about the dramatic rise in the M-2 Money Supply over the last two years emanating from fiscal spending which ‘flooded the world with cash’ following the COVID shutdown of the economy.

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May We Live in Interesting Times - Private Client Letter

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May We Live in Interesting Times - Private Client Letter

To say that we are living in “interesting times” would not do justice to what we all have experienced since the COVID-19 outbreak made headlines in February. What began as a serious health crisis quickly turned into an economic collapse as government leaders issued lockdown orders and essentially brought large parts of our economy to a standstill. Never before has the United States shut off its economy by proclamation. Interesting times indeed!!

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