MRM Commentary

Commentary

Monthly Investment Commentary

January 2025

      Ride US Economic Tailwinds

        US equities hit multiple all-time highs in 2024, outperforming their developed market peers by more than 20%. We expect resilient economic growth, the Federal Reserve’s (Fed) easing cycle, the Republican election sweep, and AI-related Tech leadership to continue to strengthen the economy and corporate profitability in 2025.

        MRM NET COMPOSITE PORTFOLIO RESULTS (As of 12/31/2024)
        MRM Group claims compliance with the Global Investment Performance Standards (GIPS®).
        Please contact MRM Group to obtain a Compliant Presentation and/or MRM's list of Composite descriptions.

        MRM Portfolio

        2025
        In 2025, we expect the US to maintain its economic and earnings fundamentals advantage over the rest of the developed markets — supported by momentum in artificial intelligence (AI) development and the new Trump administration’s pro-growth, deregulated, US-first agenda. While fiscal policy takes time to enact, less restrictive monetary policy, sturdy labor markets, and the disinflation trend have the potential to extend the soft-landing runway in the US before the effects of new pro-growth measures trickle down to the economy. We acknowledge the downside risk to global growth driven by potential trade conflicts, and higher inflation due to increased tariffs could complicate the Fed policy decisions. But corporate and individual tax cuts, along with less regulation, should support business investment and consumer spending.

        Broadening US Growth
        Over the past decade, the S&P 500® Index has beaten developed ex-US and emerging markets over every rolling 10-year period since 2015. This dominance has been supported by faster EPS growth, greater profit margin expansion, and increased productivity and efficiency. And with the US leading the next technological revolution centered around AI, it’s a good bet those advantages could continue in the coming years. Indeed, based on consensus EPS estimates, expectations are for US large- and small-cap earnings growth to outpace the rest of the world through 2026.

        MRM'S VIEW

        Markets have been pricing in a positive US outlook since the summer, with the US beating developed ex-US, US small caps outperforming large caps, and regional banks gaining 35%. The S&P 500’s price appreciation — 24.5% year to date and nearly 70% since the market bottom in September 2022 — has stretched forward price-to-earnings (P/E) valuations to near their 20-year high in 2021. Nevertheless, valuations of US small caps and regional banks appear much more attractive relative to the broad market despite their recent strong performance and improved growth outlook, presenting attractively priced growth opportunities.

        Source: State Street

        MRM model holdings as of December 31, 2024

        Allocations

        IMPORTANT DISCLOSURES

        MRM Group, Inc. (“MRM”) is a state-registered investment advisor and an independent management firm that is not affiliated with any parent organization. Using quantitative selection methods, each MRM strategy searches within a well-defined universe of securities, using consistent investment criteria to identify attractive investments and create diversified portfolios. MRM seeks to provide long-term capital growth.

        Allocations

        The portfolios do NOT use inverse or leveraged ETFs. Universe vehicles may change, from time to time, when approved by the principal of MRM Asset Allocation Group at its sole discretion.

        BENCHMARK NOTES

        Effective Nov. 1, 2016 the Dynamic Overlay benchmark was changed to Morningstar’s Tactical Allocation. The benchmark was applied retroactively to the beginning of the performance period, January 1, 2008. This change had the net effect of placing the Dynamic Overlay Model Portfolio in a more favorable light than would otherwise have been the case if we used the blended benchmark described below. Although this change had a favorable impact on the comparative effect on the model’s performance but we believe the change in benchmark more appropriately aligns with our Dynamic Overlay Strategy in that it is designed a tactical allocation rather than a static blended benchmark of 75% S&P 500 Index Total Return and 25% MSCI EAFE. Morningstar’s Tactical Allocation Category averages returns for the peer group based on the return of each fund within the group, for the period shown. The S&P 500 Index with dividends is an unmanaged composite of 500 large-capitalization companies whose data is obtained from the Standard & Poor’s website. S&P 500 is a registered trademark of McGraw-Hill, Inc. The MSCI EAFE Gross Index is a free float–adjusted market capitalization index that is designed to measure the equity market performance of developed markets, excluding the U.S. and Canada, with data from the MSCI website using price with reinvestment of dividends. The performance of blended benchmarks is shown for comparison because MRM uses securities which track indices related to these products. The Dow Jones US Select Dividend Index comprises 100 stocks and aims to represent the U.S.’s leading stocks by dividend yield. An investment cannot be made directly into an index.

        DISCLOSURES

        MRM Group claims compliance with the Global Investment Performance Standards (GIPS®). MRM has been independently verified for the periods January 1, 2008 through September 30, 2024. The verification report is available upon request. Verification assesses whether (1) MRM has complied with all the composite construction requirements of the GIPS standards on a firm-wide basis and (2) MRM’s policies and procedures are designed to calculate the present performance in compliance with the GIPS standards. Verification does not ensure the accuracy of any specific composite presentation.

        Valuations are computed and performance is reported in U.S. dollars. Client performance may differ based upon the structure of a particular investment program. For example, some programs are structured as wrap fee programs in which trading costs and brokerage commissions are included in one all-inclusive wrapped fee. As such, these costs may be higher than if the client were to pay trading costs and brokerage commissions separately. The standard management fee is 2.0%. Deviation from the model’s diversified structure may result in different risk, return, and diversification characteristics and would therefore not be representative of the models.

        All information contained herein is for informational purposes only. This is not a solicitation to offer investment advice in any state where it would be unlawful. There is no assurance that this platform will produce profitable returns or that any account will have results similar to those of the platform. Past performance is not a guarantee of future results. You may lose money. Factors impacting client returns include individual client risk tolerance, restrictions client may place on the account, investment objectives, choice of broker/dealer or custodians, as well as other factors. Any particular client’s account performance may vary substantially from the program results due to, among other things, commission, timing of order entry, or the manner in which the trades are executed. The investment return and principal value of an investment will fluctuate dramatically, and an investor’s equity, when liquidated, may be worth more or less than the original cost. Investors should consider the investment objective, risks, charges, and expenses carefully prior to investing.

        Investors should not rely on charts and graphs alone when making investing decisions. Investments in securities of non-US issuers involve investment risks different from those of U.S. issuers, including currency risks, political, social, and economic risks. Net-of-fees returns are presented after advisor, management, custodial and trading expenses. The net of fee returns are calculated using actual management fees. The actual fees charged vary and range from .5% to 2.2%, depending on the size of the account and the custodian.

        If you wish to modify or impose reasonable restrictions concerning the management of your account, or if your financial situation, investment objectives, or risk tolerance have changed, please contact your MRM Group investment advisor representative or contact the Manager at (314) 628-1100. We will contact you at least annually to determine if your investment goals, objectives, and risk tolerance have changed.

        All MRM platforms are suitable for long term investing. Please read the fact sheets and disclosures for each platform carefully before investing.

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