The stock market has continued its winning streak in 2025. Through Friday February 14th, the S&P 500 is up 4.1% year-to-date, the Nasdaq is up 3.7% and the Russell 2000 is up 2.3%.
The chart below shows us how all three indices have steadily climbed since the beginning of 2024. After very strong growth in 2023 and 2024, it is encouraging to see 2025 off to such a strong start. The Russell 2000 (small cap stocks) continues to underperform against the large cap indices.
The big stories going forward will be the tariff situation, the concerns about increasing inflation and signs of slowing growth. The threat of a recession is still not off the table. The market is still betting on a soft landing
The overvalued stock market situation will cause more volatility with any bad news. Our stock market valuation indicator currently has the S&P 500 overvalued by about 18%. If corporate profit growth accelerates, valuations will return to more normal levels. Any bad news about corporate earnings will lead to decreasing stock prices. Earnings expectations for 2025 are above average.
The most recent inflation report for January was not great. Inflation ticked up slightly. Long term interest rates have been holding steady for a while now. The Fed is not expected to lower rates significantly in 2025.
We will continue to ignore our emotions and stick to what our models are telling us. You, too, should stick to your long-term strategy.
Stay Disciplined My Friends,
Phil McAvoy
Disclaimers The Beyond Buy & Hold newsletter is published and provided for informational and entertainment purposes only. We are not advising, and will not advise you personally, concerning the nature, potential, value, or suitability of any particular security, portfolio of securities, transaction, investment strategy or other matter. Beyond Buy & Hold recommends you consult a licensed or registered professional before making any investment decision.
Investing in the financial products discussed in the Newsletter involves risk. Trading in such securities can result in immediate and substantial losses of the capital invested. Past performance is not necessarily indicative of future results. Actual results will vary widely given a variety of factors such as experience, skill, risk mitigation practices, and market dynamics.
When the risk of loss is high in the stock market, we instruct our clients to sell stocks and to purchase money market funds. We prefer to be in stocks most of the time, but money market funds are our preferred “safe haven” in bear markets.
Money market funds are funds that invest in short-term debt securities. Most money market funds invest in treasury bills (short-term US government debt), commercial paper (short-term corporate debt), or municipal debt (short-term local government debt).
The main advantages of investing in money market funds are their safety and liquidity.
Low Risk
Money market funds are required to invest in only the highest quality short-term debt instruments. In addition, the average maturity of the debt in money market funds is 60 days or less. Most money market funds invest in US treasury bills with durations of 90 days or less. The money market funds that invest in corporate debt (commercial paper) are only allowed to invest in the short-term debt highest quality companies.
Liquidity
In addition to being low-risk, money market funds are highly liquid. You can sell or buy money market funds at any time. There is no lock up period like you have with Certificates of Deposit.
Like other mutual funds, purchases and sales of money market funds only happen once per day at the close of business.
Income
You own money market funds for the income (interest) that they provide. Money market funds do not generate capital gains.
The interest income generated by money market funds follows the current interest rates of the short-term debt markets. For example, as of this writing (February 2025), a US government money market fund is paying about 4.1% interest.
The current interest rates are higher than average given the current inflation situation. In the long-term, I would only expect to earn 2% to 2.5% interest from money market funds as inflation and interest rates move lower.
Disadvantages
Money market funds are not long-term investments that will generate significant growth. Money market funds can only be expected to keep up with inflation, so money market funds are not recommended as a core holding for retirement investment accounts.
For retirement investment accounts, money market funds should only be used as a cash management tool for people in retirement and a safe place to park money when the risk of loss is high.
Money Market Funds in 401K Plans
Most 401K plans only offer a specialized version of a money market fund. These are typically called Guaranteed Income funds or Stable Value funds in 401K plans.
These versions are money market funds, but they come with an insurance component to guarantee against any loss of principal. Because Guaranteed Income funds and Stable Value funds carry these insurance policies, they offer lower returns (interest rates) than your standard money market fund. Currently, these insured money market funds offer interest rates of roughly 2% or about half the rate of traditional money market funds.
Unlike 401K plans, IRA accounts have access to the higher interest rate money market funds. This is another reason why I recommend that people rollover their 401K plans into an IRA account as early as possible.
Money Market Funds vs. Bonds
Bonds are used as a long-term investment vehicle by many risk-averse investors. When people invest in bonds, they are typically investing in intermediate term bonds or long term bonds. Intermediate term bonds have maturities in the 5 to 10 year range while long term bonds carry maturities of 15 years or more.
Typically, the longer the maturity of the bond, the higher the interest rate. Here is a current comparison of the rates of US debt of varying maturities.
3 month Treasury bills 4.2%
10 year Treasury bond 4.5%
20 year Treasury bond 4.75%
Unlike short-term treasury bills, however, longer term bonds can and do lose money in the form of lower prices for the bonds. This is what happened in 2022 and even now in 2025 longer term bonds have not recovered their losses from 2022.
This is why I don’t like bonds and is another reason why I recommend parking money in money market funds to avoid losses in the stock market.
Stay Disciplined My Friends,
Phil
Disclaimers The Beyond Buy & Hold newsletter is published and provided for informational and entertainment purposes only. We are not advising, and will not advise you personally, concerning the nature, potential, value, or suitability of any particular security, portfolio of securities, transaction, investment strategy or other matter. Beyond Buy & Hold recommends you consult a licensed or registered professional before making any investment decision.
Investing in the financial products discussed in the Newsletter involves risk. Trading in such securities can result in immediate and substantial losses of the capital invested. Past performance is not necessarily indicative of future results. Actual results will vary widely given a variety of factors such as experience, skill, risk mitigation practices, and market dynamics.
Retirement is often seen as a well-deserved time to relax, travel, and enjoy the fruits of a long and industrious career. However, beneath the surface of this idyllic vision lie several hidden health risks that can significantly impact retirees' quality of life.
In addition to helping people with their investments and their retirement finances, you may not be aware that I also have a health and wellness business. I want you to be able to fully enjoy your money in retirement by being as healthy as possible.
Retirement is one life’s major transition points and can be very stressful for many people. The shift can be particularly jarring for those with high powered careers.
The data indicates that retirement can lead to a variety of health issues.
A study from the Harvard School of Public Health found that retirees face a 40% higher risk of heart attack or stroke compared to those who remained employed. Similar findings have linked retirement to increased rates of cardiovascular disease, cancer, depression and anxiety.
Employment often requires problem-solving, learning new skills, and critical thinking, all of which keep the brain active and engaged. Retirement can lead to a decrease in mental stimulation, which may accelerate cognitive decline and increase the risk of developing dementia and Alzheimer's disease.
We know the health risks, but we also know the cures. Taking action in retirement to counteract the health concerns is critical to living well and living longer.
Routine and Purpose
One of the major reasons for the health problems listed above is a lack of a consistent routine in retirement. While you were working, you had to follow a consistent routine. It is important to develop a new and different routine in retirement.
You may wake up a different time, but make sure you get into a new sleeping and waking pattern.
You may not be heading into the office first thing in the morning, but you should create a routine that gets you going soon after you wake. The first part of your day is a good time for exercise.
Set aside time to use your brain every day. It is important to challenge yourself mentally.
Focus on your social connections. Isolation is not a good thing. Make sure your retirement activities involve groups.
A lack of purpose and a lack of social connections has been tied to bad health outcomes for seniors. Losing that reason to get up every day is a big challenge for new retirees.
You can replace your previous employment with something else. It could be volunteer work. It could be joining groups.
The most successful and healthy seniors “retire to something” rather than “from something”. Find your thing.
Stay Disciplined My Friends,
Phil
Disclaimers The Beyond Buy & Hold newsletter is published and provided for informational and entertainment purposes only. We are not advising, and will not advise you personally, concerning the nature, potential, value, or suitability of any particular security, portfolio of securities, transaction, investment strategy or other matter. Beyond Buy & Hold recommends you consult a licensed or registered professional before making any investment decision.
Investing in the financial products discussed in the Newsletter involves risk. Trading in such securities can result in immediate and substantial losses of the capital invested. Past performance is not necessarily indicative of future results. Actual results will vary widely given a variety of factors such as experience, skill, risk mitigation practices, and market dynamics.
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