Dear Friends,
With the year coming to a close, I am writing to share our reflections on 2024, along with our goals for the future.
2024 was marked by the rebound of the U.S. economy and labor market, the ongoing rise of artificial intelligence and cryptocurrency, and the impact of conflicts in the Middle East and Ukraine.
Enclosed are the observations we’ve made over the course of 2024 and how we plan to approach 2025.
The United States Economy
America voted for an “America First” agenda in 2024, making it only natural to begin this annual letter with a reflection on the United States economy. The enduring strength of the nation’s resilience was evident both in the election and in the year’s economic performance. Since 2020, the U.S. economy has consistently grown faster than any other G7 nation, and 2024 proved no exception. The S&P 500 index has risen by over 20% as of this writing, fueled by investor confidence in the country’s economic trajectory. Despite lingering global uncertainty, the United States avoided a recession, aided by the Federal Reserve’s long-anticipated pivot to a rate-reducing cycle.
Inflation, which had been a persistent concern over the last few years, steadily retreated in 2024. By year-end, it settled within the Federal Reserve’s target range of 2-3%, thanks to easing energy prices, stabilized supply chains, and strategic monetary policy. Lower inflation translated into a boost for real wages, empowering consumers and sustaining robust household spending. The labor market remained a pillar of strength, with unemployment hovering near record lows and workforce participation showing promising gains across key sectors like manufacturing, technology, and services.
The results of the 2024 election underscored the nation’s commitment to a renewed focus on domestic priorities. Policies aimed at advancing infrastructure development, achieving energy independence, and fostering innovation across emerging industries played a pivotal role in shaping the year’s economic agenda. Federal spending on renewable energy projects and AI-driven technologies surged, creating new opportunities while fortifying America’s position as a global leader in cutting-edge sectors.
Despite a healthy economic year in 2024, challenges persist. The cost of government borrowing remained elevated due to accumulated deficits, posing long-term risks to fiscal sustainability. Additionally, geopolitical tensions created uncertainties in international trade, forcing businesses to reassess supply chains and mitigate risks. Yet, the economy’s strong fundamentals and the renewed sense of purpose from the electorate kept the country on a growth trajectory.
2024 also marked a turning point for American business. Corporate investments reached record highs as companies responded to incentives for reshoring operations and adopting greener practices. Small businesses, buoyed by improved credit conditions and a strong consumer base, continued to drive innovation and job creation. Meanwhile, the real estate market showed signs of stabilization, with housing affordability improving as mortgage rates declined alongside the Fed’s rate cuts.
The United States entered 2024 with challenges yet emerged with remarkable momentum. The economy’s resilience—rooted in its adaptability and the enduring optimism of its people—remains its defining strength. As America moves forward under an “America First” agenda, the balance of innovation, investment, and fiscal prudence will be critical in sustaining its position as the engine of global growth.
Artificial Intelligence
2024 marked a pivotal chapter in the growth of artificial intelligence (AI). As highlighted in last year’s annual letter, AI continues its transformative impact on nearly every facet of the global economy.
The AI industry found itself at a crossroads, oscillating between euphoria and caution. Tech giants continue to invest in AI infrastructure, fueling a race to dominate the sector. Chipmakers have emerged as the biggest beneficiaries, with chip sales growing substantially in 2024. Meanwhile, demand for AI servers skyrocketed to respond to the global demand.
With the robust growth, challenges have begun to emerge. The soaring energy costs of training and operating generative AI models raised concerns about their long-term economic sustainability. Server manufacturers and energy providers scrambled to keep up with the demand for new data centers. At the same time, competition intensified as nimble upstarts introduced specialized chips and smaller, more efficient AI models, challenging the dominance of industry leaders.
Shareholders began voicing concerns over potential over investment, with some warning of an AI bubble. As the race to innovate accelerates, tech giants face growing scrutiny to demonstrate that their massive expenditures can deliver sustainable returns.
We expect to see significant additional capital deployed into AI in 2025 as recognition that we are still in the early wave of a new secular trend.
Crypto Currency
Digital asset prices are highly volatile, often driven by shifts in sentiment and policy. At the start of 2023, Bitcoin was valued at just over $16,000 but surged to exceed $100,000 by December 2024. This meteoric rise gained momentum following Donald Trump’s re-election, which ushered in significant changes for the crypto industry. Notably, Mr. Trump nominated Paul Atkins, a known crypto advocate, to lead the Securities and Exchange Commission (SEC).
With prominent venture capital leaders seemingly influencing the new administration, regulatory and enforcement barriers are expected to ease, paving the way for the crypto sector’s growth. Unlike previous market booms, this surge has a distinct characteristic: mainstream investors, hedge funds, and some of the world’s largest money managers are now actively participating alongside early crypto adopters. This signals a shift toward broader institutional adoption.
If regulatory challenges to the industry are reduced, the institutional embrace of crypto may accelerate further. This presents a paradox for crypto’s early advocates. While the increased institutionalization will likely drive Bitcoin and other digital assets to new heights, it will also align them more closely with traditional asset classes, making them subject to the fluctuations of the broader financial system.
War in the Middle East
The Middle East remained a focal point of global tension in 2024, with several interconnected conflicts shaping the region’s dynamics. The Israeli-Palestinian conflict saw one of its most volatile years in recent history, as clashes between Israeli forces and Palestinian factions intensified following a series of provocations and escalations. Gaza experienced prolonged airstrikes, while the West Bank faced a surge in violence, prompting widespread international concern. Diplomatic efforts to mediate were largely ineffective.
Meanwhile, the civil war in Syria persisted in a fragmented but deadly state. The Assad regime, backed by Russian and Iranian support, fell from power as its leader, Bashar Al Assad fled to Russia. The humanitarian crisis deepened, with millions of displaced Syrians facing dire conditions. The conflict also underscored the growing influence of regional powers like Turkey, which expanded its military presence in northern Syria to counter Kurdish forces. The power vacuum created by Assad’s departure is uncertain. Undoubtedly, the new Trump Administration will be forced to confront a volatile Syria beginning to re-build itself.
In Yemen, efforts toward peace showed some progress, with a fragile ceasefire holding in several areas. However, tensions between the Saudi-backed government and Houthi rebels remained unresolved, leaving the country’s future uncertain. The devastating humanitarian toll continued, with millions in need of food, medical aid, and basic infrastructure. International organizations struggled to address these needs amid funding shortages and restricted access to conflict zones.
The region’s prospects for stability remain fragile in 2025. In Israel and Palestine, the potential for de-escalation depends on renewed diplomatic engagement, though deep-seated grievances and leadership challenges on both sides make meaningful progress difficult. Syria’s instability will require external involvement to deal with the complex internal dynamics. Yemen offers a glimmer of hope, with the potential for a more robust peace process if international stakeholders remain committed to supporting reconciliation and rebuilding efforts.
The Middle East in 2025 will continue to grapple with the challenges of protracted conflicts, shifting alliances, and external interventions. However, opportunities for localized agreements and incremental progress exist, particularly in areas where humanitarian needs demand urgent attention. The actions of regional powers and the level of international engagement will play a critical role in shaping whether the region moves closer to peace or deeper into turmoil. The region will test the Trump Administration’s desire to pursue an isolationist approach to global affairs.
The Russian War on Ukraine
This year, the war between Russia and Ukraine entered a critical phase, with Ukraine achieving meaningful gains in its counteroffensive. Ukrainian forces regained strategic territory in the east and south, leveraging advanced Western weapons and innovative battlefield tactics. Despite these successes, progress was slow and costly, with both sides suffering heavy casualties. Russia, in response, intensified its missile strikes on Ukrainian cities and infrastructure, aiming to disrupt civilian life and undermine Ukraine’s resolve.
Western support remained a cornerstone of Ukraine’s resistance, as NATO allies continued to provide advanced weaponry, intelligence, and financial aid. However, political shifts in some Western nations led to questions about the long-term sustainability of this support. In the United States, the “America First” agenda influenced debates over foreign aid priorities, while European nations grappled with energy security concerns and economic pressures tied to the ongoing war. These challenges highlighted the delicate balance between supporting Ukraine and addressing domestic political realities.
On the Russian side, the strain of a prolonged war became increasingly apparent. Economic sanctions continued to erode Russia’s economy, with supply chain disruptions and declining public morale posing significant challenges. Reports of internal dissent, though tightly controlled, suggested cracks in the Kremlin’s narrative of strength and inevitability. Yet, President Vladimir Putin maintained a hardline stance, doubling down on his rhetoric of protecting Russian sovereignty and countering Western encroachment.
As 2025 approaches, the path forward remains uncertain. Ukraine, emboldened by its territorial gains and growing international partnerships, may continue to press for further advances, though its resources are stretched thin. Meanwhile, Russia’s ability to sustain its military campaign amid economic and social pressures is increasingly in question. While some analysts see a glimmer of hope for peace talks, the deep-seated animosities and mutual mistrust make a negotiated resolution unlikely in the near term. Instead, the conflict seems poised to persist, reshaping the geopolitical landscape and testing the resolve of both nations and their allies.
This prolonged war has broader implications for global stability, with the potential to redefine alliances, trade relationships, and security strategies in the years to come. The resilience of Ukraine and the adaptability of its allies will likely determine whether 2025 brings a shift toward resolution or an escalation of hostilities.
Investment Themes in the World Ahead
In 2025, artificial intelligence (AI) and automation remain a central investment theme, continuing a rapid growth trajectory. The AI industry has expanded beyond traditional tech companies, permeating sectors such as healthcare, manufacturing, and financial services. Companies that develop AI chips, algorithms, and cloud infrastructure are set to benefit as organizations across industries seek to leverage AI for efficiency and innovation. Specialized AI applications, such as generative AI for content creation and advanced robotics for manufacturing, are seeing increasing adoption, driving demand for both software and hardware solutions.
Investors are also eyeing the growth of AI-enabled automation, particularly in logistics and supply chain management, where firms are deploying autonomous vehicles and drones to streamline operations. However, the rising energy costs associated with AI and the push for greener technology are prompting companies to innovate around efficiency, presenting opportunities in the energy-tech crossover space.
As the global commitment to combat climate change intensifies, renewable energy and green technologies remain a cornerstone for long-term investment. Solar, wind, and battery storage technologies are seeing significant advancements, driven by both government incentives and private-sector innovation. In 2025, the electrification of transportation continues to accelerate, with a growing focus on EV charging infrastructure and next-generation battery technologies such as solid-state batteries.
Additionally, carbon capture and hydrogen energy technologies are gaining traction, particularly in regions with stringent emission targets. Companies developing energy-efficient solutions, such as smart grids and energy storage systems, are well-positioned for growth. ESG (environmental, social, and governance) investing continues to influence capital allocation, as investors prioritize firms with strong sustainability credentials and a commitment to reducing their carbon footprint.
The digital transformation of businesses, accelerated by hybrid work models and increased reliance on cloud services, underscores the growing importance of cybersecurity and digital infrastructure. In 2025, the rise of cyber threats—ranging from ransomware to state-sponsored attacks—has made cybersecurity a critical investment theme. Companies providing advanced threat detection, data encryption, and secure cloud platforms are likely to experience sustained growth.
At the same time, investments in digital infrastructure are surging to meet the demands of AI, 5G networks, and the Internet of Things (IoT). Data center operators, edge computing providers, and fiber-optic network developers are benefiting from this trend as businesses and governments seek to modernize their IT infrastructure to keep pace with evolving technology needs.
The healthcare sector continues to present robust opportunities in 2025, driven by innovation in biotech, telemedicine, and personalized medicine. Breakthroughs in gene editing and mRNA technology are revolutionizing treatments for genetic disorders and infectious diseases, while telehealth platforms are expanding access to care. As populations age in developed countries, demand for diagnostics, remote monitoring devices, and senior care services is expected to grow.
Another key trend is the integration of AI in healthcare, which is improving diagnostics, streamlining drug discovery, and enhancing patient care. Companies developing AI-driven solutions for disease detection and management are attracting investor attention, as these technologies demonstrate potential for cost savings and better health outcomes.
The investment themes for 2025 reflect a dynamic mix of technological innovation that highlight the need for adaptability in a rapidly changing economic landscape.
Manhattan West in 2025
In 2024, we undertook a comprehensive re-imagination of our firm’s platform to better position Manhattan West for the future. A key step in this transformation was the strategic decision to outsource our Tax and Business Management services, enabling us to collaborate with a diverse array of specialized providers. This shift allowed us to streamline our operations and enhance client account support functions, ensuring a more efficient and seamless experience for our clients.
As part of these efforts, we restructured our team, reducing headcount in select areas to align resources more closely with our core priorities. In December, we proudly unveiled a redesigned website that communicates our refined value proposition, emphasizing our two pillars of expertise: private wealth and private investments.
As we enter our ninth year of business, we are filled with optimism for the year ahead. 2024 was marked by meaningful growth, as we welcomed a significant number of new clients across both private wealth and private investment segments. This expansion is a testament to the trust our clients place in us and the strength of our tailored approach to managing and growing their assets.
Looking forward to 2025, we remain committed to innovation and growth. A central focus will be on enhancing our technology stack, making it even easier for clients to access and monitor their investments. We understand that transparency and convenience are paramount, and these technological advancements will ensure that our clients have the tools they need at their fingertips. We plan to expand our team of Financial Advisors, strengthening our ability to provide personalized service and expert guidance. On the investment front, we will continue to identify and invest in the world’s most innovative private companies, delivering unique opportunities for our clients.
To all who have partnered with Manhattan West, we extend our deepest gratitude. Your trust and collaboration are the foundation of our success, and we are excited to build on that momentum in 2025. We look forward to a year of shared prosperity and growth. From all of us at Manhattan West, we wish you a happy, healthy, and successful New Year.
With kindest regards,
Lorenzo Esparza
CEO – Manhattan West
