Dear Investor,
I would like to start by wishing you a successful and prosperous 2025.
In retrospect, December 2024 did not live up to static expectations. ESSC closed the month with a loss of -15.46%. For the year as a whole, there was a profit of +22.17%.
The SP500 index also closed December negatively, with a loss of -2.50%.
On December 18, the FED announced its interest rate decision. As expected, the interest rate was lowered by 0.25 points. The stock market's reaction to this 'news' was surprising, with a loss of more than 3% in less than two hours.
The prices of many shares were/are also somewhat ahead of expectations, which means that often only a small trigger is needed to take profits. The words of the FED chairman were the trigger. Small caps react strongly to negative words and interest rate decisions because many small caps are relatively heavily financed.
If there are few buyers to support prices, sellers will have the upper hand, which will push prices down. The markets are still in an upward trend. In an upward trend, a correction in the indices of -5% to -10% is quite normal, unavoidable, and very healthy. Once a correction occurs, patience (and confidence) is often tested. This patience is tested in two ways: in time (i.e., the duration of the correction) and/or in price (the depth of the correction). Both remain difficult when you are in the middle of it, but corrections also come to an end. Small caps are generally more volatile (the amplitude of the movements) than large cap stocks, which means that corrections in price are often more severe.
UPST was the best performer in the portfolio, while ROOT was the worst.
Sincerely,
Henry van Ginkel