In the fourth quarter of 2024, alternative investments (“alternatives”), on average, had slightly negative returns with Real Estate being a large negative outlier as interest rates moved significantly higher. The Federal Reserve (the “Fed”) continued the path of lowering the Federal Funds Rate, choosing to cut 25 basis points at each of its meetings in the quarter. The U.S. Treasury curve steepened significantly as short maturities followed the decline in Fed Funds Rate, while yields 5 years and longer rose precipitously to completely unwind the rally in rates of the third quarter. Intermediate and long rates are now at levels above where they began 2024. Higher rates are likely the result of significant revision in expected Fed action and bond market participants way of co-opting the Fed's “higher for longer” mantra.  The economic picture domestically remains positive if not spectacular, in our view. Recent inflation data has trended upward, and money supply growth (“M2”) has been positive but concerns over faltering growth in China may be keeping longer-term inflation expectations in check.

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Companies are investing billions to build out artificial intelligence capabilities.  Ryan shares First Trust’s perspective on various investment themes that may benefit—either directly or indirectly—in the years ahead.

Artificial intelligence (“AI”) is widely expected to be the next great disruptive technology, but for AI to reach its potential, a significant increase in electrical power generation and transmission will be required. While most new power capacity has come from renewable energy in recent years, we believe natural gas will play a critical role in satisfying AI’s voracious appetite for electricity over the next several years. Below, we discuss some of the reasons that natural gas may be well-suited to meet our growing energy needs. We then highlight how the First Trust North American Energy Infrastructure Fund (EMLP) may benefit from growing electricity demand from AI and other sources.

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• Net inflows for US-listed ETFs totaled $146.1 billion in December, bringing total ETF assets under management to $10.19 trillion.
  
  
• Equity ETFs had net inflows totaling $121.1 billion in December, bringing trailing 12-months (TTM) net inflows to $753.3 billion. Active equity ETFs accounted for $18.1 billion in net inflows in December, compared to $102.9 billion in net inflows for passive equity ETFs. Total AUM in actively managed equity ETFs was $527.8 billion, accounting for 6.5% of all equity ETF assets ($8.12 trillion), as of 12/31/24.
  
  
• Fixed income ETFs had net inflows totaling $15.8 billion in December, bringing TTM net inflows to $295.7 billion. Active fixed income ETFs accounted for $8.2 billion in net inflows in December, compared to $7.6 billion in net inflows for passive fixed income ETFs. Total AUM in actively managed fixed income ETFs were $285.9 billion, accounting for 16.1% of all fixed income ETF assets ($1.78 trillion), as of 12/31/24.
  
  
• Commodities ETFs had net outflows totaling $1.5 billion in December, bringing TTM net inflows to $1.1 billion. Energy commodity ETFs (-$0.6 billion) and precious metals ETFs (-$0.7 billion) had the largest net outflows for the month.

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Last year was a spectacular year for the U.S. equity markets. Almost a repeat of 2023 in many ways. Stocks, as measured by the S&P 500 Index (“Index”), returned 25% in 2024, following a 26.3% return in 2023, resulting in a total return of 57.9% over the two-year period. In fact, the Index has delivered annual returns exceeding 25% in four of the past six calendar years.

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Paul Black and Mike Trigg are portfolio managers and co-CEOs at WCM Investment Management. They join the podcast to discuss WCM’s unique path to becoming a leading global equity manager, highlighting WCM’s unconventional approach for identifying investment opportunities, including why a company’s culture matters and the important of economic moat trajectory.

• Net inflows for US-listed ETFs totaled $155.8 billion in November, bringing total ETF assets under management to $10.35 trillion.
  
  
• Equity ETFs had net inflows totaling $118.4 billion in November, bringing trailing 12-months (TTM) net inflows to $740.3 billion. Active equity ETFs accounted for $16.9 billion in net inflows in November, compared to $101.4 billion in net inflows for passive equity ETFs. Total AUM in actively managed equity ETFs was $526.4 billion, accounting for 6.4% of all equity ETF assets ($8.27 trillion), as of 11/30/24.
  
  
• Fixed income ETFs had net inflows totaling $29.2 billion in November, bringing TTM net inflows to $303.5 billion.  Active fixed income ETFs accounted for $14.3 billion in net inflows in November, compared to $15.0 billion in net inflows for passive fixed income ETFs. Total AUM in actively managed fixed income ETFs were $280.0 billion, accounting for 15.6% of all fixed income ETF assets ($1.79 trillion), as of 11/30/24.
  
  
• Commodities ETFs had net outflows totaling $0.7 billion in November, bringing TTM net inflows to $2.3 billion. Energy commodity ETFs (-$0.3 billion) accounted for roughly half of the commodity sub-category outflow in November.

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Richard Bernstein provides his perspective on key investment themes to watch in the year ahead, including overlooked opportunities, potential pitfalls, and the value of seeking “maximum diversification.”

The Thanksgiving holiday celebrates all the blessings in our lives and includes a bountiful harvest on many dining room tables. It’s a wonderful day. 

For equity holders of all stripes, it has been a year of bountiful returns. You could hardly go wrong. Even the worst performing size, style or sector index was still rewarded with excellent returns. Large cap stocks, as measured by the S&P 500 Index, have done the best, up 28% year to date (“YTD”), but mid cap (S&P MidCap 400 Index) and small cap (S&P SmallCap 600 Index) stocks have delivered 23% and 18%, respectively, over the last 11 months. The S&P 500 Growth Index is up 35% but the S&P 500 Value Index is still up 20%. At the sector level, every sector is positive for the year with financials leading the way, up 38% and health care at the bottom, still positive 9%. Seven sectors are up 20% or more.

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Dave Rutherford has been a Navy SEAL, a contractor for Blackwater and the CIA, and performance coach.  In this episode, he shares insights and strategies for pursuing excellence and overcoming fear in high-pressure environments.