Two important developments are worthy of exploration in this quarter's commentary. First, rising intermediate and long-term interest rates are creating a markedly different environment for bonds and the broader investment landscape. Second, the trends that have characterized stock market returns over the last few years continued to an even greater degree in the fourth quarter and full year 2024.
Investors were treated to a bumpy ride in the third quarter, but stocks are at record highs as the final three months of 2024 get underway, and bonds are solidly in the green. The Federal Reserve’s long-awaited reduction in interest rates played a crucial role in the solid returns on stocks and bonds.
Global stock returns were mixed yet relatively flat in the second quarter—except for a handful of mega-cap U.S. companies (“The Magnificent Seven”), which once again dominated the return of market capitalization-weighted indices.
This coming June 1st will mark the 20th anniversary of Bristlecone. Many of you were there with us at the beginning of the firm, many more have joined since. We deeply appreciate the trust each of you has placed in us over the years.
Rather than pay attention to these useless oracles, we stick to a disciplined investment strategy that has delivered predictable long-term outcomes through different types of—unpredictable—market environments: diversify across asset classes and ride out the cycles.
This increased deficit and a resilient job market made investors worry that the Fed would continue raising rates or, at the very least, hold them “higher for longer.” The result was a “bear steepening” of the yield curve, whereby the last few months saw a continuation of the defining trend of the past 1-2 years: a relentless rise in interest rates.