Overcoming uneven market performance, Westmount portfolios thrived in 2024

For the second year in a row, the stocks of large U.S. companies delivered exceptional returns, contributing to very strong performance for well-diversified portfolios. Unlike 2023, though, when returns were consistently strong across most asset classes, 2024’s performance was more uneven among and even within asset classes.

As the chart below reveals, the strong returns of large U.S. companies dwarfed the returns of stocks in other equity markets, as well as those of most other asset categories. Bonds were modestly positive for the year, but the higher yields of recent years were offset partially by bond price declines.

As in 2023, Westmount’s stock portfolio outperformed its market benchmark in 2024. Consistent with the preceding three years, our bond and alternative assets portfolios also outperformed their respective benchmarks, further contributing to the strong performance of client portfolios. Our clients’ outperformance in 2024 resulted primarily from our overweight allocation to large U.S. companies within stocks, the positioning of our bond holdings relative to the bond market, and the holdings we selected to provide exposure to various alternative asset classes and strategies.

Stocks

The continued dominance of U.S. large-cap stocks was again fueled by another exceptional year for technology companies. The growing demand for artificial intelligence and its transformative potential has driven investor enthusiasm. By year’s end, large U.S. companies had produced their strongest two-year return period in the past quarter of a century.

This support persisted despite concerns about higher interest rates and rising unemployment. Overcoming these challenges, the U.S. economy proved remarkably stable, with GDP averaging 2.6% quarter-over-quarter growth through Q3, showcasing strong underlying fundamentals.

With our strategic overweighting of U.S. large-cap stocks, Westmount’s stock portfolios gained +19.30%, exceeding the MSCI All Country World Index return of +17.49%. While the global stock market has delivered an impressive two-year return of +43.6%, we recommend approaching 2025 with more tempered expectations. Rising inflation, higher medium- and long-term interest rates, and stretched company valuations present headwinds that could make achieving a third consecutive year of exceptional stock performance far less likely. Diversification across a broader mix of asset classes, including alternatives and bonds, remains critical to managing risk and volatility while still seeking attractive returns.

Alternatives

Our alternatives-income portfolio continued its streak of strong performance, delivering robust returns for the fourth consecutive year with minimal volatility. Private credit, introduced to our portfolios in late 2020, has proven to be a reliable source of income, backed by tangible assets like corporate and real estate loans.

The AMG Pantheon Credit Solutions Fund (PCSZX), a key addition, added meaningful value this year by acquiring loans in the secondary market at a discount, enabling income generation and price appreciation. Overall, the alternatives-income portfolio rose +11.41%, outperforming its benchmark, the ICE BofA US High Yield Index, which gained +8.22%.

On the alternatives-growth side, we introduced the Cascade Private Capital Fund (CPEFX) in late March 2024. This private equity-focused fund capitalizes on purchasing existing positions at a discount and accessing co-investment opportunities at reduced costs. Cascade’s extensive network enables access to these exclusive deals. From our initial purchase date through year-end, the fund returned +26.99%, demonstrating its potential as a long-term growth driver.

We continue to believe that our alternative income and growth holdings will deliver attractive returns while also reducing overall portfolio risk this year, owing in part to their potential ability to perform out of sync with traditional stocks and bonds during periods of market declines.

Bonds

The bond market faced a volatile 2024, with returns constrained by persistent inflation and economic uncertainty. At the start of the year, the prospects for bonds appeared promising, with high yields and the potential for price appreciation coming from rate cuts and a softening economy. The Federal Reserve Bank did, in fact, begin to cut short-term rates, which was favorably received by the bond market—at least initially.

In the second half of the year, though, strong economic data, stubborn inflation, and uncertainty following the election about the inflationary impact of the next administration’s proposed policies dampened bond market sentiment. Reacting to the same concerns, the Fed took its foot off the gas, indicating it was slowing down the pace of interest rate cuts.

Despite these challenges to the bond market, Westmount clients’ bond portfolios delivered an impressive result as we focused on investing in shorter-term, lower-quality credits along with mostly higher-quality, medium-term corporate and government bonds. Westmount bond portfolios finished the year up +4.00%, outperforming the Bloomberg Aggregate Bond Index, which rose only +1.25%.

2025 begins somewhat similarly to 2024, with bond yields (the source of income generation) being relatively high. Optimism about falling rates, though, is somewhat reduced this year in light of uncertainty over persistent inflation. This leads to a wider range of expected return outcomes for bonds this year and supports our continued shorter-maturity positioning relative to the bond market. Underlying bond fundamentals also continue to support our turning to alternative-income holdings as an attractive replacement for bonds for a meaningful portion of our clients’ overall portfolios.