2025 New Year's Market Bites

“there were only four times in the history of the S&P 500 when it returned 20% or more for two years in a row. 

In three of those four instances (a small sample, mind you), the index declined in the subsequent two-year period. (The exception was 1995-98, when the powerful TMT bubble caused the decline to be delayed until 2000, but then the index lost almost 40% in three years.)

In the last two years, it’s happened for the fifth time. The S&P 500 was up 26% in 2023 and 25% in 2024, for the best two-year stretch since 1997-98.”

“Going forward, the big question for all of us is this European underperformance due to something that makes them chronically worse investments, or perhaps if the (real or perceived) geopolitical risk and uncertainty helps to explain this divergence in returns across the pond.

Or if something has happened in terms of valuation and price discovery in the US market.”

“Today’s S&P-leading companies are, in many ways, much better than the best companies of the past.

They enjoy massive technological advantages. They have vast scale, dominant market shares, and thus above average profit margins.”

“Whatever the outcome is in the coming 5-10 years it will feel obvious after the fact.

Of course U.S. stocks continued to outperform because they’re the best companies!

Of course U.S. stocks underperformed because valuations were so high!

Again, I don’t know.

I know investors here and around the globe are pouring money into U.S. stocks hand over fist and abandoning other areas of the global stock market.

I’m still a believer in diversification for the simple fact that I have no idea what the future will hold. Diversification is an admission of ignorance about the future.

Time will tell if this is one of those generational turning points in historical relationships or another example of investors chasing past performance”

“The Fed has cut interest rates 100 basis points since September, and over the same period, 10-year interest rates are up 100 basis points. This is highly unusual..”

Nothing to Fear, Nothing to Hide

“I want to end with a warning, a plea, and a word of encouragement.

I’ve had a front-row seat to the unplanned and rapid disassembly of quite a few peoples’ lives this year. I’m not sure if it’s my age, or stage, or just random, but I’ve never had so many friends and acquaintances struggle so mightily in such deeply personal ways. From addiction and adultery to mental health breaks and alleged criminal activity, I’ve seen what feels like “it all” this year. I’ve gotten more “I need to talk” texts than I can count.

Our biggest problems always start small. It’s just a little help to get me through the day. It’s just one night of fun with the boys. It’s just a little corner cut. It’s just some fun flirting. It’s just a short season of unsustainable work. We realize that we’re not okay, but we like the results and believe we can make it work. Our desires overpower our conscience.

To state the obvious, life is complicated and messy. I certainly am. The more I see other peoples’ lives up-close, the more I realize that everyone, and I mean everyone, is battling something dark and difficult. You must trust me that you are not alone in your battle. What you’re going through is far more common than you can imagine, no matter how messed up you think it is.

The problem is that we all hide out of fear. We tell each other we’re fine when we’re not. This goes back to the Garden of Eden. When sin entered the world, our response was to hide and blame. We’ve been doing so ever since. Genesis is either ground-breaking literature or the Word of God, but either way, you should read it. It’s all there.

In this hiding we lie to ourselves and to each other. We try to cover ourselves with fig leaves of success, money, beauty, religiosity, and morality. Our masks become so tight and so polished, and we play pretend for so long that we lose ourselves. The perfect job, perfect family, perfect lives can only hold for so long. And in the hiding, the darkness grows. As Tolkien depicts in The Lord of the Rings, Smeagol transforms into Gollum until eventually, Gollum forgets he once had another name.

Sin is the carbon monoxide of life. We think we’re the same person we’ve always been. That’s what makes sin so confusing, unpredictable, and lethal. We’re being poisoned, but can’t feel the damage. We think we can play with darkness, or make the darkness work for us. We think we can control it. We think our darkness is so ugly that if known, no one would love us. But, we also love the darkness. Our loves are disordered, and it’s killing us.

There become cracks in the mask, but we maintain such a distance that we’re convinced no one notices. We keep pretending, while our hearts slowly become deadened. We assume that cautiously navigating everyone, especially those closest to us, is just how life works. And often, we try harder to keep the mask tight and polished, getting more fit, more successful, and more involved in our churches. We pretend that if we shroud ourselves in good works and the apparent fruit of them, no one will ever know about the brokenness.

And then the facade detonates. It always does, but rarely when we expect or in the way we would have expected. The shrapnel maims. Everything we built our lives on is threatened, which is the exact fear that we were hiding from. Our fears become a self-fulfilling prophecy, and it was our hiding that enabled it.

This probably sounds impossible, but true freedom starts with nothing to hide. Light is the best disinfectant, and when it comes to our sin, it is the only disinfectant. We must be known. We must live in deep relationship, in community with people who know the real us, the real pain, the real struggles, and our real dreams.

There is a danger to living this way. People will hurt us. People will betray us. People will use what they know to their advantage. I know, because as I’ve tried to live this way, I’ve experienced some serious costs. But, I promise you it’s worth it. You will find true friends, those who will mourn and celebrate with you, those who will tell you the truth in love. The alternative is loneliness and misery. Aren’t we tired of living alone? Haven’t we had enough pain of no one knowing the real us?

There seems to be a Rubicon that we all have to cross, and from my experience usually the choice presents between the ages 35 and 45. It’s the decision to be you, or to continue to play a fictitious character. If you haven’t gotten there yet, it’s coming. You can prepare by actively seeking real relationships and community. Or, you can keep accumulating soul-level debt, which is like piling sticks of dynamite next to a roaring fire.

If you are battling anything in secret, and the odds are extremely high that you are, I beg you to become known to someone you trust. And, stay known, especially when you want to go back into hiding. I promise you that while the consequences might be painful, you and the people around you will experience far less suffering than if you leave it unaddressed. The real relationships and freedom to be found on the other side are worth it."