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That’s a Wrap on 2024: Market Commentary from Cabana’s CEO – January 13, 2025 

6 days ago

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I hope everyone had a great holiday season and was able to focus on time with family and friends. Sometimes that isn’t easy, as the barrage of pressures can be relentless and unfortunately, can make it difficult to focus on what is really important. I think it is good to always remember that we are all in this together and everybody is facing the same things. So, together let’s have a great 2025 and be the best we can be. 

As far as the markets and investing go, we have seen interest rates explode upward again on renewed fears of inflation and an unbelievably strong U.S. economy. The 10-Year Treasury Yield is now higher than it was one year ago. That is amazing given the outlook for rate cuts at the beginning of last year. The challenges to bonds, fixed income, dividend paying stocks and other interest rate sensitive sectors roll on. 

Bonds were down again in 2024, concluding the worst three year stretch since 1787. Real estate also saw losses.  Health care, energy, and basic materials fought to avoid annual losses. Other sectors finished in the black with some room to spare. The big winner in all this has again been big technology stocks, which have ridden the AI craze, and now make up more than 30% of the broad market cap-weighed indices that we see quoted on CNBC and other media outlets.  

I have included two charts below for a visual depiction of what I am talking about. The first shows the 2024 returns of the tech laden Nasdaq 100 (QQQ), the equal weight S&P 500 (RSP) and the aggregate bond index (AGG). The second chart shows the impact rapidly rising interest rates have recently had on bonds and some market sectors outside of tech. 

Nasdaq 100 (QQQ), the Equal Weight S&P 500 (RSP) and the Aggregate Bond Index (AGG) Since September (via StockCharts.com):   

Bonds and Market Sectors (Outside of Tech) Since September (via StockCharts.com):  

The bottom line is that many stock sectors and most asset classes (bonds, real estate and commodities) have struggled in the face of relentless interest rate pressures. Don’t be fooled into thinking the “market” has been great, because that is not the case. One segment of the stock market, made up of the largest companies in human history, has been great. So, this begs the question “why not just invest in technology and forget the rest?” This is a fair question given what we have seen over the past couple of years and one I have asked myself. Maybe things are just different now and nothing else really matters. Maybe times have changed, and technology is impervious to the dynamics of monetary and fiscal policy. Maybe AI changes everything. I don’t have the answer, but I do know that the same was said in 1999 when the internet was the all-powerful new technology. Two years and hundreds of bankruptcies later the Nasdaq 100 was down 77% (October 4, 2002).  

At Cabana, we are “all asset” managers. That means that we are invested in all the major asset classes. This includes stock sectors of all types (not just technology), bonds, real estate, commodities and the U.S. Dollar (which is the reserve currency of the world). We change the weighting of the asset classes in response to various economic and technical data, but we are always diversified. We also have rules related to risk management. These rules prohibit taking on too much exposure to any given asset class or sector (like technology). This is all by design and the result of managing money for a long time. We are investors not traders and we are not trying to hit home runs. We try to hit lots of singles and an occasional double while avoiding a strike out. We strive to act as a core investment solution for all investors. Yeah, we have had some big years, but that was gravy. Our underlying principle is to avoid losses, stay invested and participate in long-term price appreciation across asset classes.  

I have had lots of conversations over the past two years with our advisor partners and family office clients about these issues and some have decided that our system is not for them. That is ok.  I want everybody to be successful, whether they are invested with us or somewhere else. Just know that at Cabana, we invest your money like we invest our money. It doesn’t mean we are right, but it does mean we believe in what we do. 

We will be having our year-in-review webinar for all our clients at the end of this month and will go over all of the above and much more, including new opportunities for this year. Be on the lookout for the invitation and be ready to participate! As always, thank you for your partnership and trust.  

We are currently Cautiously Bullish. 

Disclaimers

January 17, 2024

This material is prepared by Cabana LLC, dba Cabana Asset Management and/or its affiliates (together “Cabana”) for informational purposes only and is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. This material may only be distributed in its original format and may not be altered or reproduced without the prior written consent of Cabana. The opinions expressed reflect the judgement of the author, are as of the date of its publication and may change as subsequent conditions vary. The information and opinions contained in this material are derived from proprietary and nonproprietary sources deemed by Cabana to be reliable, are not necessarily all-inclusive and are not guaranteed as to accuracy. As such, no warranty of accuracy or reliability is given and no responsibility arising in any other way for errors and omissions (including responsibility to any person by reason of negligence) is accepted by Cabana, its officers, employees or agents.  

“CARA” is Cabana’s Cyclical Asset Reallocation Algorithm. Scenes assigned as per the judgment of The Cabana Group. Scene names and number of scenes have changed over time in an effort to obtain efficiencies and provide clarity of investment objective. 

This material may contain ‘forward looking’ information that is not purely historical in nature. Such information may include, among other things, projections and forecasts. There is no guarantee that any forecasts made will come to pass. Reliance upon information in this material is at the sole discretion of the reader. Past performance is not a reliable indicator of current or future results and should not be the sole factor of consideration when selecting a product or strategy. All investment strategies have the potential for profit or loss. All strategies have different degrees of risk. There is no guarantee that any specific investment or strategy will be suitable or profitable for a particular client. The information provided here is neither tax nor legal advice. Investors should speak to their tax professional for specific information regarding their tax situation. Investment involves risk including possible loss of principal.  

Cabana LLC, dba Cabana Asset Management (“Cabana”), is an SEC registered investment adviser with offices in Fayetteville, AR and Plano, TX. The firm only transacts business in states where it is properly registered or is exempted from registration requirements. Registration as an investment adviser is not an endorsement of the firm by securities regulators and does not mean the adviser has achieved a specific level of skill or ability. Additional information regarding Cabana, including its fees, can be found in Cabana’s Form ADV Part 2A or Form CRS. A copy of which is available upon request or online at www.adviserinfo.sec.gov/. 

Past performance is no guarantee of future results. All investment strategies have different degrees of risk and the corresponding potential for profit or loss. Asset allocation and diversification will not necessarily improve returns and cannot eliminate the risk of investment losses. “Target Drawdown” is merely a descriptive term used to describe the general strategy and objective of the portfolio, it is not a guarantee, nor should it be construed to suggest safety or protection from loss. There is no guarantee that portfolio performance will remain consistent with the targeted drawdown parameter. While risk tolerance and targeted “drawdown” are identified on the front end for each portfolio, Cabana’s algorithm does not take any one client’s situation into account and there is no guarantee that Cabana’s strategies will be suitable for any investor. Investors and advisors should not simply rely on the name of any portfolio to determine what is suitable. It is the responsibility of investment advisors to determine what is suitable for their clients. Cabana manages assets on multiple custodial platforms. Performance results for specific investors will vary based upon differences in associated costs and asset availability.  

Cabana claims compliance with the Global Investment Performance Standards (GIPS®). GIPS® is a trademark of the CFA Institute. The CFA Institute does not endorse or promote this organization, nor does it warrant the accuracy or quality of the content contained herein. To receive a GIPS Report and/or a firm’s list of composite/pooled fund descriptions please email your request to info@thecabanagroup.com.

All recommendations made in the prior 12 months are available upon request. Cabana’s allocation history is available here. For additional information regarding our services, including performance disclosures and award methodology, please visit https://thecabanagroup.com/disclaimers/. 

Commonly used index/benchmark definitions:  

All indices and categories are unmanaged and an individual cannot invest directly in an index or category. Index returns do not include fees or expenses. Benchmark indices will likely materially differ from Cabana’s portfolio strategies. Detailed information as to how the returns are calculated can be obtained online from the following link: https://thecabanagroup.com/disclaimers/performance-reporting-methodology/. 

Morningstar’s Moderate Target Risk index  follows a moderate equity risk preference and is based on well-established asset allocation methodology from Ibbotson Associates, a Morningstar company.  

Morningstar’s Tactical Allocation category includes portfolios that seek to provide capital appreciation and income by actively shifting allocations across investments. These portfolios have material shifts across equity regions, and bond sectors on a frequent basis. 

The S&P 500 Index is a market-capitalization weighted stock market index of 500 widely held large-cap stocks often used as a proxy for the U.S. stock market.  

The Russell 2000 and 3000 indices are market-capitalization weighted stock market indices that include, respectively, 2000 and 3000 of the most widely-held stocks and are often used as proxies for the U.S. stock market. 

The Nasdaq Composite Index is a market-weight capitalization index that covers more than 3,000 stocks listed on the Nasdaq Stock Market. What is the Nasdaq Composite, and What Companies are in It? | Nasdaq