As we’ve closed the books on 2024, reflecting on the year’s investment landscape offers valuable insights for navigating what lies ahead. From identifying opportunities within U.S. equities to rethinking bonds, embracing options strategies, and prioritizing liquidity, the past year provided lessons that can shape portfolios for years to come. Here’s what we learned and how to apply it moving forward.
U.S. Equities: Beneath the Surface Lies Value
In 2024, the “MAG7” (Meta, Apple, Google, and others) continued to dominate the headlines, but beyond these mega-cap behemoths, U.S. equities offered compelling opportunities. Small-cap stocks, value strategies, and sectors outside the tech-driven mega-cap sphere trade at attractive valuations and we believe will deliver solid returns.
As noted in Are You Really Diversified?, diversification doesn’t require venturing too much capital overseas. The U.S. remains a fertile ground for growth and value investors alike, thanks to its dynamic economy, shareholder-friendly environment, and breadth of opportunities.
- Key takeaway: Investors don’t have to look far to find value. The U.S. equity market offers plenty of underappreciated areas ripe for growth and diversification.
Bonds: The Need for a New Playbook
For much of 2024, it was our view that bonds appeared expensive relative to cash. As highlighted in The Unrealistic Math of Bonds Protecting a Portfolio, their incremental return over cash often failed to justify the duration and credit risks. Compounding this issue, the traditional negative stock-bond correlation showed signs of breaking down, further diminishing bonds’ role as a diversifier.
With cash offering attractive yields and minimal risk, it has increasingly become a viable alternative to fixed-income allocations.
- Key takeaway: Bonds face new challenges in delivering value and diversification. Investors must carefully evaluate their role in portfolios, particularly relative to cash.
Alternatives: Options Strategies in the Spotlight
Options strategies proved their worth in 2024, proving to be an inexpensive source of exposure and/or protection. We believe 2025 may provide an opportunity for investors to use options in a variety of new ways. As explored in Selling Puts as a Form of Risk Management, selling puts can provide a means to generate income while managing downside risks. Similarly, hedged equity strategies discussed in The Case for Flexibility in Next-Generation Hedged Equity Products allow investors to stay engaged in equity markets while mitigating volatility.
These flexible strategies proved essential in adapting to market conditions and managing risk while pursuing returns.
- Key takeaway: Options strategies and innovative hedged equity solutions are no longer niche tools—they are critical to building resilient, adaptable portfolios.
Crypto: A Lesson in Wealth Transfer
2024 saw the speculative hype surrounding crypto assets like Bitcoin to continue. As highlighted in Bitcoin: Wealth Creation or Wealth Transfer?, the narrative around crypto often revealed a wealth transfer dynamic, where early adopters benefitted at the expense of latecomers chasing the trend, but also a new way to diversify exposure.
The underlying lesson is clear: long-term wealth creation stems from sound investments rooted in fundamentals—not speculative bubbles, but exposure to an asset class with differentiated return streams may still add value to a portfolio.
- Key takeaway: Avoid speculative hype without an understanding of the impact to a portfolio. Focus in large part on assets that align with fundamentals and offer transparency and scalability.
Hedge Fund Alts: Liquidity Reigns Supreme
Hedge fund illiquidity and higher fees came under scrutiny in 2024. As explored in ETFs as Hedge Funds 2.0: A Better Way to Capture Beta and Alpha, public markets provided better flexibility, transparency, and often times risk-adjusted returns. Liquidity is a vital asset in responding to shifting market conditions.
While hedge funds have promised smoother returns, it often masked the underlying risks and underperformed compared to public market opportunities.
- Key takeaway: Liquidity is king. Public markets remain better equipped to capture returns in a dynamic environment and new liquid alternatives provide strong competition to even the best hedge funds.
Applying 2024’s Lessons to the Future
Looking back at 2024 reveals critical insights that can guide portfolios in the years to come:
1. Diversify within the U.S. Beneath the mega-cap dominance, U.S. equities offer abundant opportunities in small caps, value stocks, and overlooked sectors.
2. Rethink bonds. With cash delivering higher yields and less risk, traditional fixed-income allocations require reevaluation.
3. Embrace optionality. These approaches are essential for managing risk and capturing returns in today’s markets.
4. Prioritize liquidity. Public markets provide the adaptability necessary to navigate changing conditions.
5. Avoid speculative fads without an understanding of the risks. Sustainable wealth to society comes from fundamentals—not fleeting hype.
By leveraging these lessons, investors can position themselves to navigate uncertainty and capitalize on opportunities in the years ahead. Let’s take what 2024 taught us and move forward with confidence.
Disclosures
Past performance is not indicative of future results. This material is not financial advice or an offer to sell any product. The information contained herein should not be considered a recommendation to purchase or sell any particular security. Forward looking statements cannot be guaranteed.
This commentary offers generalized research, not personalized investment advice. It is for informational purposes only and does not constitute a complete description of our investment services or performance. Nothing in this commentary should be interpreted to state or imply that past results are an indication of future investment returns. All investments involve risk and unless otherwise stated, are not guaranteed. Be sure to consult with an investment & tax professional before implementing any investment strategy. Investing involves risk. Principal loss is possible.
Advisory services are offered through Aptus Capital Advisors, LLC, a Registered Investment Adviser registered with the Securities and Exchange Commission. Registration does not imply a certain level or skill or training. More information about the advisor, its investment strategies and objectives, is included in the firm’s Form ADV Part 2, which can be obtained, at no charge, by calling (251) 517-7198. Aptus Capital Advisors, LLC is headquartered in Fairhope, Alabama. ACA-2501-14.
