Current Client Conversations Managing Expectations

Each week I summarize the central themes of conversations I am having with clients lately for you, simply to give you sense of how these dialogues go; to give you a flavor of how I work with clients.  Right now I am trying to set expectations for 2025. 

 Using Recency Bias, think back to market actions in 2020 and 2021 (good S&P 500), and then 2022, (bad S&P 500). This pattern usually repeats itself over the years unless there are more cataclysmic events. As such, while no one can predict why, my gut tells me to be prepared for a tough 2025. I’ve spent the last two weeks discussing this with clients. 

 Yesterday, I spent the afternoon at the Denver Art Museum, looking at dozens and dozens of pictures.  I found a handful I liked. This was a visceral emotional reaction.  Then, my mind used rational reasons to justify these pictures’ appeal. 

 Often this happens with markets.  There is performance “X,” good bad or otherwise. It occurs, and to explain it, journalists and others come up with rational explanations.  Maybe they’re right, maybe they’re wrong.  Your interpretation is based on your personal world view. 

 So, I can’t tell you exactly what will cause my prediction of a tough market in 2025, other than decades of experience dealing with good and bad markets.  But I would rather say it will be a tough market and be proven wrong, than say everything is rosy and be way off. After all, 2023 and 2024—barring something unforeseen in the next 14 weeks—have been pretty darn good. 

 Feel free to come back to me with your input.