December 2024 has delivered several political and economic headlines.
Let’s ask ChatGPT. Without prompts, the A.I. powered platform provides several answers to the question “What are some of the trending finance topics in December 2024?”
What a difference a week can make!
I enjoyed that “A.I. and Automation in Finance” was included as a topic. There are many large-language models out there today and ChatGPT is just one option. In my experience, it’s been a next generation Google search. Microsoft’s Co-pilot has been a little more helpful in that it includes links and references to the source of information which instills a certain authority and credibility to its results.
With both sets of answers including resiliency and market movements, I thought it would be helpful to add a “chart of the month.” Reviewing calendar year returns and the intra-year declines is an excellent perspective-generating exercise if market resiliency is on your mind.
Intra-year declines are measured as the negative return from a dollar invested at a market peak to the subsequent market low in the same year. I used monthly data for the chart, in USD, not including distributions/dividends for the Vanguard Total World Stock ETF.
Market volatility is nothing new. The founder of JPMorgan Chase has been credited with the following quote when asked about market direction. “I can tell you exactly what it will do, it will fluctuate.”
What I think is interesting from this ChatGPT experiment is that the U.S. Federal Reserve meeting didn’t come up. It's not a sexy topic, but it contributes to market direction. Federal Reserve Chair, Jerome Powell effectively pivoted with his commentary around the direction of interest rates. Higher for longer type language. That effectively pulled the emergency brake on any hope of a Santa Claus rally to finish in 2024.
This development shouldn’t derail 2025, but it will check elevated equity valuations and wishful bond investors. Equity investors like ourselves remain invested and focused on qualities that matter most to us, investing in businesses that generate attractive cash flows. I’m fairly optimistic about the year ahead – history suggests you are better off not betting on negative results. Will there be some bumps along the way? Yes. Will those bumps produce new opportunities? Yes, and we will evaluate them with the same consistency and discipline with which Matco was founded.