Dear Client, Partner, Prospective Client:
The Minnesota Vikings were picked by many to be in rebuilding mode and estimated to have 6.5
wins and ended up being 14-3 in the regular season. Every expert and critic were dead wrong.
To my long-standing Michigan clients and diehard Detroit Lions fans, we hope we get another
crack at you. Both states would love to have a NFL Championship! And if you think forecasting
football is hard, try the economy, stock market and elections. Not one Wall Street firm came
close to predicting the S&P 500 year-end level on 12-31-2024. They were all too low. The
sharp slow-down in the economy or predictions of a recession did not materialize.
Politically, Republicans have swept into power and will have a strong mandate to change policy
and govern accordingly. Campaign rhetoric focused on tariffs, reduced inflation, immigration
policy and tax policy changes. These all contributed to a new but old President Trump taking
office once again.
Back-to-back 20% plus annual gains in the S&P 500 have experts predicting we can do it once
more in 2025. We are skeptical because not once in history have we had three years in a row
with those types of gains. We are cautiously optimistic that it will be a good year but not great,
and the market volatility will return. The Federal Reserve cut interest rates three times in 2024,
which is not nearly as many times as they predicted. They cut them by 50 basis points in
September, 25 basis points in November and 25 basis points in December bringing the rate to
4.25-4.5%. The Fed’s December 2024 statement indicated that they do not expect to hit their
2% inflation target until 2026.
Consumer credit decreased at a seasonally adjusted rate of 1.8%, revolving credit decreased at
an annual rate of 12%, while non-revolving credit increased at an annual rate of 2% last month.
This is positive news as credit card delinquencies and credit card balances have been
increasing for months. The Biden administration established a new rule for medical debt that
removes the debt from credit reports and lenders are not allowed to use medical information in
lending decisions. This wipes out 49 million for 15 million consumers in outstanding, unpaid
medical bills.
2025 will be an interesting year to be an investor coming off the gains of the last two years. Will
the small caps continue to rise? Will International equities turn the corner? Is there an end in
sight for Bitcoin and all of the affiliated ETF’s? We will know soon enough but we plan to stay
the course for now and prepare for a potential correction in the second half of the year. Happy
New Year!
Sincerely,
J.B. L’Esperance, ChFC
If you have questions about our strategies or would like to open an account with Barking Sands
Capital, please give us a call at 952.500.8854 or 248.687.1400 or email us at
jb@barkingsandscapital.com