In its December 18 meeting, the Federal Reserve signalled that inflation is going to be higher than it expected. If the Fed has to raise rates again at some point next year, the market would not like that at all. The S&P 500 index has returned 60% in the last 2 years, and is trading at valuations seen only in the dot-com and pandemic stimulus booms.
But the final phase of a bull market can last a painfully long time for those who try to be contrarian. We remain invested, but contemplate reducing risk at some point in 2025. It will be a year of capital preservation, after 2 years of capital growth.