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March 12, 2024
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May 1, 2024
By Brett Freese
Investing requires a level of well-reasoned hope in light of more questions than answers. This challenge has been true of every year and every season of my 35 years of investing. Even before I started investing, I remember all the questions and the fear surrounding the possibility of World War Three where Russia and the US would destroy each other and the entire world with nuclear warheads. It seemed to a young teenager (like me at the time) that it was not if, but when. But here we are in 2024, 40 years since the 1980s and we have newer “will happen” issues to contend with.
I’m not trying to paint an overly optimistic picture of the future. There are really hard questions to answer about debt levels, moral character, US political anger and division, and many geopolitical issues.
However, as the former great mutual fund manager Peter Lynch stated “Far more money has been lost by investors preparing for corrections, or trying to anticipate corrections, than has been lost in corrections themselves.” As I stated in last quarter’s review, we should be strategic with what the market gives us, but most importantly stick to the long-term plan.
Economic & Investment Highlights:
- The Federal Reserve (Fed) has kept the Fed Funds rate the same since the July 2023 meeting. The most significant development with the Fed is that they are no longer hiking rates. The amount and timing of future rate cuts are far less important. Note: the Fed governors believe three 25 bps cuts are likely to come this year. Always keep in mind that The Federal Reserve has a dual mandate to achieve both stable prices and maximum sustainable employment.
- Inflation: Both the Consumer Price Index and Producer Price Index have cooled off substantially and that is a very healthy direction for inflation. However, the continued reduction in inflation may become more difficult and seem “sticky” in some sectors of the economy.
- Fiscal Policies – This will be stressful and very interesting to watch fiscal policy positioning as we get closer to November when the American voter goes to the polls and gives us a President for the next four years, 100% of the House of representatives for two years, and 1/3 of the Senate for the next 6 years.
- Recession Risks: As with last quarter, we continue to ask the question: Where do we go from here? No landing, soft landing, moderate landing, hard landing? The market is pricing in a soft to no landing scenario, but we need to be aware of the possibility of both inflation picking back up and a faster slow down than predicted. Just like a sports team has to be in the present, the “what next” has to be prepared for as well.
- Geopolitical Risks: The continued war in Europe and Gaza, China’s ever-changing policies (including debt levels, tensions over Taiwan and AI chips), the Red Sea attacks, and other challenges will continue to keep the financial markets on their toes. Europe has slipped into recession territory and important to watch.
- Artificial Intelligence (AI) has been a great topic of investment discussion in 2023 and will continue throughout 2024. The perceived winners and losers of such disruptive technology will constantly be updating and adjusting.
- Most of the major stock indices were all up this past quarter (see “Market Scorecard” below).
- Gold was up approximately 7.37% price per ounce, and the broad basket of commodities was up 1.67% for the last 90 days. Oil was up 13.60% for the quarter.
- Bitcoin was up 57.73% for the quarter.
Historical Stock Market Declines:
Market declines and inclines rarely look the same or even feel the same, but they do happen and the ups and downs are a part of the process – It is important to have a plan/strategy so emotions don’t dictate buying or selling.
A 5% or greater loss occurs about 3 times a year
A 10% or greater loss occurs about once a year
A 15% or greater loss occurs about once every 2 years
A 20% or greater loss occurs about once every 3.5 years
Please know that when stock prices go down the “market collapse gurus” receive the most air time. Likewise, when stock prices go up all the “bull market gurus” talk about how the market will continue to be up BIG. Please know that most “gurus” are great with hindsight to justify how important it is to have their voice heard.
Market Scorecard for the last 13 weeks ending 03/31/2024:
US Equities:
+ 10.18% S&P 500 (Index of the largest US publicly traded companies)
+ 11.54% Large Cap Growth – Morningstar Category
+ 8.18% Large Cap Value – Morningstar Category
+ 5.36% Russell 2000 Growth (Index of Small-cap growth US publicly traded companies)
+ 0.26% Russell 2000 Value (Index of Small-cap value US publicly traded companies)
International Equities:
+ 6.69% Foreign Large Growth – Morningstar Category
+ 3.97% Foreign Large Value – Morningstar Category
+ 2.51% Foreign Small/Mid Growth – Morningstar Category
+ 3.46% Foreign Small/Mid Value – Morningstar Category
Bonds:
– 1.27% U.S. Aggregate Bond (Index representing intermediate term investment grade bonds in the U.S.)
– 0.44% Corporate Bond – Morningstar Category
+ 0.46% Short Government – Morningstar Category
+ 0.11% Muni National Bond Intermediate Index – Morningstar Category
Other:
+ 7.37% Gold Price
+ 57.73% Bitcoin
+ 1.67% Commodities Broad Basket – Morningstar Category
Current Annual Money Market Rates ending 03/29/2024:
5.17% Schwab Value Money Market
5.02% Schwab Treasury Money Market
Market Indicators:
Inflation:
3.09% as of 03/01/24 (Down 0.15% from 3.24% on 12/1/23
Unemployment:
3.9% as of 03/8/24 (Up 0.2% from 3.7% in December 2023)
Fed Funds Target Rate:
5.25 – 5.50% as of 03/26/24 (Same rate of 5.25 – 5.50% of 12/22/23)
Suggested Next Steps:
- Understand that market cycles are normal. The markets go up and down in mostly unpredictable directions and amounts. Many times, the ups and downs of investments seem to make sense only after they happen, however, market prediction is very difficult. (i.e. the next stock market crash has been predicted every year since 2008).
- Your investments are just one factor in the success of your life, money, and purpose. Make sure that you are confident in your full financial plan, so you can successfully have an amazing ROL (Return on Life).
- Your investment allocation and diversification are important factors in both risk management and future returns. Therefore, if you have questions about your investment plan, please schedule a phone or in-person meeting with your TrustWell Financial Advisor(s).
