Another year, another step closer to our step-down age. Here I will share my views for the past year, my opinions of the coming year and an update on Bob’s portfolio.
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2024 Review
This year would be remembered as the moment when the dreaded I-words in the economy are coming down, after almost two and a half years since the United States (U.S.) Federal Reserve (known as the Fed) started to raise interest rates to combat inflation. Beginning with a surprise move of a 50 basis-point reduction in Sep 2024, the rate cut sent the markets skyward. However, just the week before Christmas, the Fed is signalling the possibility of lesser rate cuts in 2025 in anticipation of potential inflation rearing its head again, which caused a slight tumble in the markets for a couple of days.
Still, we are seeing a great bull run in the U.S. and local markets; the S&P 500 had seen an increase of +25.25% year-to-date (YTD) and the Straits Times Index posting +16.33% YTD1. While the two markets are already on an upward trajectory this year, they are further boosted with the election of a pro-business U.S. president and administration in early Nov 2024.
HACK, IPAY & ICLN
Going forward in my yearly review posts, I will dedicate a section on the three sectors/industries that I espoused, namely cybersecurity, payment solutions and clean energy, using their represented exchange traded funds (ETFs) HACK, IPAY and ICLN respectively, which I am vested in. The table below (Fig. 1) shows the three ETFs, the YTD performance till 30 Nov 2024, and the compounded annual growth rate (CAGR) from 1 Jan 2018 (nominal and inflation adjusted), since it was at the 2017 review blog post (see here) that I had declared these three sectors to have potential.
ETF | 2024 YTD (till 24 Dec 2024)1 | Nominal CAGR (1 Jan 2018 to 30 Nov 2024)2 | Inflation Adjusted CAGR (1 Jan 2018 to 30 Nov 2024)2 |
HACK | +25.11% | +13.43% | +9.45% |
IPAY | +27.45% | +8.70% | +4.90% |
ICLN | -25.50% | +5.54% | +1.84% |
Fig.1: YTD and CAGR nominal and inflation adjusted returns of HACK, IPAY and ICLN
2025 Preview
We could be entering into uncharted waters not just in 2025, but also in the years to come as more geopolitical factors are at play. The world is clearly dichotomizing into two sides of various degrees, with very little room for being in a pure neutral state. Globalization may be dwindling, with autarkic tendencies coming in the form of country, region or even political bloc (e.g., BRICS). These meant that for multinational companies, doing business globally would face obstacles in the form of policy and regulatory risks, not to mention a drop in earnings. For investors who own these companies directly and/or through securities such as ETFs and unit trusts, they may consequently see their investments’ further growth slightly stunted.
Yet, not all is lost, and this is where diversification by region/country comes in handy. There are still opportunities in the U.S. markets and on the other side, especially China which is currently the second largest economy around. Being seen as neutral is advantageous especially in places where companies and investments of both sides are traded freely, such as Singapore.
Regarding interest rates, if you had read the “2024 Review” section above, the bolded words are deliberately done by me to emphasize that the future is unknown and it is not absolute, so there may be a chance that the number of rate cuts would either increase or further reduced in 2025.
Bob
As of 24 Dec 2024, Bob’s Bedokian Portfolio had grown to slightly above SGD 125K in value and gained a dividend amount of SGD 3,784.38. Overall, Bob’s portfolio was up 7.25% for 2024. Bob will rebalance on 2 Jan 2025 with another SGD 5,000 injection, so stay tuned to his portfolio.
Happy 2025!
Disclosure
The Bedokian is vested in HACK, IPAY and ICLN.
1 – Yahoo Finance, YTD as of 24 Dec 2024
2 – Portfolio Visualizer, HACK, IPAY and ICLN between 1 Jan 2018 to 30 Nov 2024 (accessed 24 Dec 2024)
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