BayFort Capital December 2024 Factsheet
BayFort Capital’s Global Leaders Portfolio returned -2.98% in USD (-1.55% in INR) in December. The large-cap S&P 500 index declined by 2.5% in November while the small-cap Russell 2000 index, declined by 8.4%. Market activity was influenced heavily by the U.S. elections, with stocks tied to Trump trade driving much of the post-election rally.
In December, the top-performing S&P 500 sectors were Consumer Discretionary (+1.11%), Technology (-0.35%), and Comm. Services (-1.36%). Materials (-10.76%) was the weakest, followed by Energy (-9.58%) and Real Estate (-8.65%). Stock declines in December weren’t broad-based. Large cap Tech stocks helped S&P 500 outperform the equal-weight S&P 500 Index (-6.44%) by 394 bps.
Here are a few important points to consider as we think about the rest of the year.
1) Valuations: The S&P 500’s forward P/E ratio of 21.4 indicates that valuations are not in bubble territory, reducing the likelihood of a market downturn triggered by valuation concerns. Moreover, earnings for the equal-weighted S&P 500 index are expected to increase by 14% in 2025, compared with a forecast of just 2% growth in CY-24.
2) Economic Outlook and Fed Policy: The US economy is gradually transitioning towards a soft landing, supported by the Federal Reserve’s measured approach to monetary policy normalization. The Trump administration’s tax cuts and business-friendly policies will further strengthen the economic outlook. With minimal credit risks, excess capacity, or asset bubbles, and global rate cuts providing additional tailwinds, the US economy is projected to maintain a steady growth trajectory.
3) Inflation Risk in the US: Concerns about inflation driven by tariffs on Chinese imports are largely unfounded. President Trump is unlikely to immediately impose a 60% tariff on all Chinese goods. Instead, a phased and gradual approach over several years is expected, allowing industries time to adapt supply chains and mitigate inflationary effects. Consequently, inflation from tariffs is not seen as a significant risk to the U.S. economy. Higher inflation expectations in CY-25 hurt the market sentiment with the yield on the 10-year Treasury bond rising to 4.57% in December, after closing at 4.17% in November.
Investment Strategy: Our Global Leaders Portfolio continues to invest in companies that are at the forefront of innovation, generate robust cash flows, and have demonstrated resilience in challenging market environments. We believe that the current market conditions present a compelling opportunity for both new and existing investors to participate in the long-term growth of the global knowledge economy.
