Let's Go

January 18, 2025 by Martin L. Yokosawa

I hope you are enjoying the new year and want to bless all those in Southern California affected by the disastrous fires. My wife, daughter, and I happened to be close by when the fire started. We were visiting and staying with a dear client of almost 40 years and became quite concerned about the poor air quality due to the intense smoke and ash in the air, not to mention the speed the fire was spreading. It was a good reminder to value what you have.

In the fourth quarter of 2024, one of the most talked about questions of the year was answered by the election of Donald J. Trump. His election ignited a honeymoon rally in November, but by the end of the year much of it was given back. It appears to me that the stock market, in the short term, reflects most of the positive attributes of the new administration’s policies and is recognizing they may not develop as smoothly as once thought.

During the fourth quarter of 2024, the S&P 500 Index gained 2.1%, the NASDAQ Index gained 6.2%, the Russell 2000 Growth Index gained 1.6%, and the iShares Barclays 7-10 yr. Treasury Bond ETF (IEF) lost 5.8%.^[1] Fixed income and bondholders had a particularly difficult quarter as inflationary concerns for 2025 caused bond interest rates to ratchet up.

Predicting the market is one of the hardest things that I am constantly asked to do. It would be easiest enough to look at historical trends and come up with a believable number, that is what many do, but it is a low-quality prediction. Today making predictions is more difficult than ever due to fickle investor expectations, low-quality agenda financial reporting, the ease and speed for investors to enter and exit the market, unexpected macro and geopolitical events… Don’t feel sorry for me, I love navigating the avalanche of variables in search of new gems to purchase for clients.

For the stock market, in 2025 I see two scenarios. The first is that the momentum of 2024 continues, but to a lesser degree as the markets already reflect many of the potential benefits claimed by the new administration’s policies. It would not be straight-line as volatility will remain high as execution of any sea change in policies is bound to experience bumps-in the-road. The second is that if the big-tech or mega-cap earnings growth begins to stall, we could see a significant sell-off as unsophisticated investors, used to easy gains, become disillusioned and exit the market causing a market rout.

Predictions:

The level of market volatility will remain at historic levels as the new administration’s policies do not roll out as smoothly as expected.
Inflation will continue to be at the forefront of people’s minds but not be an overriding problem.
The great Tariff scare of 2025 will materialize and be similarly effective as the Trump administration’s previous tariff policy.
The highly valued big tech and mega cap stocks take a back seat to small-cap and value stocks as they are undervalued on a historical basis.
After a wild ride, Bitcoin proponents will be disillusioned as the new administration’s cryptocurrency interest may not be exclusive to one digital currency.
The Middle East will continue to be the Middle East, conflicted.

2025 should be another exciting year.

As always, I will be vigilant in following and assessing new developments to take advantage of new ideas and minimize risks as I see them.

Very truly yours,

Martin L. Yokosawa

Torii^® Asset Management, Inc. Landolt Securities, Inc.

9S040 Stearman Drive, Naperville, IL. 60564 (630) 420-0221

Securities processed by and investment advice provided through Landolt Securities, Inc. Member: FINRA/SIPC

Torii Asset Management, Inc. and Landolt Securities, Inc. are not affiliated companies.

DISCLAIMER.

This presentation was created by the research and thoughts of a human, not by an artificial intelligence (AI) program that generates content automatically. AI can produce text, images, or presentations based on prompts, often mimicking human writing style, but lacking the nuanced understanding and creativity of a human author.

The information contained in this quarterly review is for marketing purposes only. Nothing contained in this quarterly review is intended to be, nor shall it be construed as investment advice by Torii Asset Management or any of its affiliates, nor is it to be relied upon in making any investment or other decision. Neither the information nor any opinion expressed in this newsletter constitutes an offer to buy or sell any security or instrument or participate in any trading strategy. The information in the newsletter is not a complete description of the securities, markets or developments discussed. Information and opinions regarding individual securities do not mean that a security is recommended or suitable for a particular investor. Prior to making any investment decision, you are advised to consult with your broker, investment advisor or other appropriate tax or financial professional to determine the suitability of any investment. Opinions and estimates expressed on this newsletter constitute Torii Asset Management’s judgment as of the date appearing on the opinion or estimate and are subject to change without notice. This information may not reflect events occurring after the date or time of publication. Torii Asset Management is not obligated to continue to offer information or opinions regarding any security, instrument, or service. Information has been obtained from sources considered reliable, but its accuracy and completeness are not guaranteed. Torii Asset Management and its officers, directors, employees, agents and/or affiliates may have executed, or may in the future execute, transactions in any of the securities or derivatives of any securities discussed in this newsletter. Past performance is not necessarily a guide to future performance and is no guarantee of future results. Securities products are not FDIC insured, are not guaranteed by any bank, and involve investment risk, including possible loss of entire value. Torii Asset Management and Martin Yokosawa shall not be responsible or have any liability for investment decisions based upon, or the results obtained from, the information provided. Torii Asset Management is not responsible for the content of other newsletters to which this one may be linked and reserves the right to remove such links.

[1] These returns are price based and exclusive of dividend reinvestment. Return data provided by QUODD Financial, ETFreplay.com, and Yahoo Finance