A message to you from SDI Partners — Q1 2025
In 2024, U.S. stocks ripped higher and carried the S&P 500 to record highs as the economy kept growing. However, the Federal Reserve began cutting interest rates too, which could signal an economic decline on the horizon, leaving even the most confident investors feeling on edge about the future. With that in mind, we wanted to take this opportunity to share some positive news from SDI Partners as we enter the new year.
By nearly all metrics, SDI Partners performed in line with expectations and is on track to have another strong year.
- We distributed approx. $204.8M to our capital partners in 2024.
- Our basic partner account (BPA) & accredited partner account (APA) performed in line with projections, posting an average monthly return of 9.4% & 14.1%, respectively.
- Our overall trading results produced a ~77% hit rate, with losses limited to -0.4% per trade.
Since the start of 2024 and through the year, both our offerings achieved within 0.1% of their projected target range or better.
We continue to develop and improve our proprietary technology, launch new security and platform features to enhance your investor experience, and invest in our human capital for the benefit of our partners.
With that said, 2025 might be a bad year for a traditional portfolio of stocks and bonds.
Historically, when the U.S. pauses rates, markets rally really hard, as was the case in 2024. When they keep rates higher for longer, the rally is higher and longer. During the last days of high rates, the SPX has volatility but keeps going higher, climbing the wall of worry sometimes even after rate cuts have already started before a sizeable market decline then follows. This has always been the case, historically.
We believe the economic decline to come will be brief but exacerbated by a number of factors:
- The “Magnificent Seven” are dominating the stock market to a worrying degree — Microsoft, Apple, Nvidia, Amazon, Alphabet, Meta, and Tesla are collectively valued at more than $13 trillion, representing about a quarter of the entire US stock market, which could send the SPX falling off a cliff when the selling begins.
- Inflationary pressures from Donald Trump’s tariff proposals on China. Europe and Canada.
- Political and geopolitical upheaval — and the limited prospects for significant improvements. I.e., Israel-Gaza, Russia-Ukraine, China-Taiwan, withering European governments.
As we see it, markets might peak in 2025, but things should get ugly right after.
We believe the real returns are in the alternative investment market.
In significant drawdowns of the past, there were few opportunities to invest beyond stocks and bonds. Today, more alternative options are available than ever.
In consultation with your advisors, we encourage you to consider if an opportunity exists to expand your allocation to alternative investment strategies. No matter the environment, we suggest allocating at least 20% of your portfolio to absolute return alternative investment strategies.
We thank our capital partners for the maintained trust in SDI and look forward to an enduring relationship.
David Rosenberg
On behalf of SDI’s Managing Partners
