Landsberg Bennett Private Wealth Management: Market Update Q1 2025

January 24, 2025

Michael Landsberg, Chief Investment Officer at Landsberg Bennett Private Wealth Management, shared his insights on the state of the markets and his outlook for 2025 in the company’s Q1 update. Reflecting on 2024, he emphasized, “Earnings drive stock prices—always have, always will.” While inflationary pressures are expected to rise, Landsberg remains optimistic about growth prospects and portfolio diversification strategies for the year ahead.

Key Takeaways:

Inflation Outlook:

  • Landsberg noted that inflation bottomed at 2.4% in September 2024 and has been rising for three consecutive months. His projections indicate inflation will continue to climb until mid-2025.
  • “I don’t think we’re going back to the 9% levels seen in 2021, but inflation is clearly moving in the opposite direction from what the Fed expects,” he explained.
  • He attributed rising inflation to factors like higher oil prices, sticky shelter costs, and natural disasters that impact supply chains.

Federal Reserve and Interest Rates:

  • Contrary to market expectations of two Fed rate cuts in 2025, Landsberg believes the Fed will remain on hold due to rising inflationary pressures.
  • He commented on the bond market’s skepticism toward Fed actions, saying, “The bond market isn’t buying what the Fed is selling—it’s already pricing higher yields.”
  • Shorter-duration bonds remain his preferred play in fixed income, as they offer good returns without the risk associated with longer maturities.

Stock Market Performance:

  • 2024 was a strong year for equities, with large-cap and mid-cap stocks delivering impressive returns. Even small caps posted gains after years of underperformance.
  • Landsberg highlighted the strength in corporate earnings, stating, “S&P 500 earnings rose 8% last year, while NASDAQ earnings jumped 20% year-over-year. This earnings growth is a key driver of stock prices.”
  • He remains bullish on growth-oriented sectors like technology and consumer discretionary, emphasizing companies with pricing power.

Portfolio Diversification:

  • Diversification remains a cornerstone of Landsberg’s strategy. He stressed the importance of spreading risk across asset classes and regions, noting, “Too many portfolios are heavily concentrated in large-cap growth stocks.”
  • Alternatives like gold, the U.S. dollar, and commodities have played a key role in smoothing out portfolio returns. He also hinted at adding a small cryptocurrency allocation to take advantage of its potential as a hedge against inflation.
  • “Our approach is about reducing risk while maintaining exposure to high-quality growth opportunities,” he added.

Rebalancing Strategy:

  • Landsberg emphasized the importance of rebalancing portfolios to manage risk. “When a stock’s weight in the portfolio doubles due to performance, we trim it back to its original allocation. It’s about locking in gains and reducing downside risk,” he explained.
  • He highlighted how this strategy has worked well in the past, particularly in trimming tech exposure after strong years and adding during pullbacks.

Sector Outlook for 2025:

  • Landsberg expects U.S.-focused companies to outperform, given potential policy shifts under the new administration.
  • He remains cautious on defense and healthcare stocks, citing potential spending cuts and regulatory scrutiny on drug pricing and reimbursements.
  • Tariff talk, while a concern, is viewed by Landsberg as a negotiation tactic rather than a significant economic threat.

Emerging and International Markets:

  • While favoring U.S.-centric investments, Landsberg advised limiting exposure to emerging markets, which could face headwinds from potential trade tensions and a stronger U.S. dollar.
  • His international allocation focuses on developed markets with stable growth prospects.

Real Estate and Small Caps:

  • Real estate remains part of the portfolio’s alternative allocation, though Landsberg cautioned against overexposure to small-cap stocks.
  • “Small caps have delivered no returns over the past three years. Earnings growth in this segment remains negative, making it a less attractive space for investment,” he noted.

Policy and Dollar Impact:

  • Landsberg is optimistic about the U.S. dollar, citing potential spending cuts and deficit reduction as tailwinds. “A stronger dollar benefits the economy and keeps inflation in check,” he said.
  • However, he expressed concerns about inefficient government spending in defense and healthcare, areas where the new administration could make cuts.

Closing Thoughts for Clients:

  • Landsberg reiterated the importance of staying focused on long-term goals and not overreacting to short-term market noise.
  • “We continue to believe in the power of disciplined investing. Diversification, rebalancing, and sticking to high-quality companies with strong earnings are key to navigating 2025,” he concluded.

Landsberg foresees a positive year for equities driven by earnings growth, though he expects volatility as inflation pressures persist. By maintaining a diversified portfolio and focusing on high-quality assets, he believes investors can achieve strong long-term returns despite potential headwinds in the market.

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