I had the privilege of speaking with some top investment thinkers for Morningstar’s The Long View podcast this past year. Christine Benz, other colleagues, and I interviewed portfolio managers, strategists, and economists. Many—though far from all—of my favorite moments from 2024 are included in the Best of The Long View: Investing episode.
Several common themes emerged from the interviews. As investors think about portfolio positioning for 2025, here are a few ideas I found compelling:
Tread Carefully in US Equities
Whether it was the investment team at Primecap Management, Pimco CIO Dan Ivascyn, or market historian Jeremy Grantham, several guests sounded warnings about the US stock market. It’s no secret that a handful of stocks have dominated. Nvidia NVDA and Microsoft MSFT now exceed $3 trillion in market capitalization; both Amazon.com AMZN and Alphabet GOOGL are worth more than $2 trillion; and Meta Platforms META is approaching that mark. Concentration levels have risen markedly, with the top 10 constituents of the Morningstar US Market Index representing 31% of its weight. That well exceeds the 24% level reached in the late 1990s, which rang alarm bells back then and preceded a market crash.
“At some point, the law of large numbers kicks in,” said Primecap’s Joel Fried in early 2024. “We think the market assumes that this group of companies will grow revenues at a compound annual rate of at least 10% over the next five years … That’s an extremely high bar in our opinion.”
Grantham believes that a speculative bubble has inflated on enthusiasm for artificial intelligence’s promise. Comparing AI to canals, railroads, and the internet, Grantham said: “When you have these great developments, they overdo themselves in the short term, they crash in the intermediate term, and then they come out of the wreckage and change the world in the long term.”