Is Your Financial Plan Driving Your Investment Plan?
September 1, 2024
2025 Contribution Limits, With New SECURE Act Limits
November 1, 2024
By Brett Freese
What you focus on expands!
Both my boys are currently attending college and away from home. However, while they lived at home there were many statements my wife, Susan, and I made to them over and over again that are clearly etched in their minds. One of those statements is “What you focus on expands.” We emphasized that what you hear over and over again, what you see over and over again, and what you do over and over again, will strongly influence what you see, hear and do in the future.
So, my advice: Please consider turning off the News!
An unwritten rule in the Freese household is to have no News on the TV or phone after 4pm everyday. I would challenge anyone to do this for one week and see how your “joy” of life improves. Not only are you likely to have more peace, but you will get back a lot of time to do other things. You can focus on opportunities that are fun, productive, and relational. I have rarely (likely never) felt better about life after spending 2 hours watching CNN or FOX News (or name your news provider). Most of the time anger, frustration, pessimism, blame are the feelings I have after watching/listening to them. How do you feel?
Regardless of who wins the Presidency, approximately 75% of Americans will not be happy with the outcome. Approximately 50% of Republicans really want Trump as President and about 50% of Democrats really want Harris as President.
Instead of focusing on the election as much, what could you do with that time? Maybe you can invest in relationships that are important to you and make a difference in the lives of those you love and care for. One of the greatest descriptions of my dad by those who knew him was that “he loved well.” Wow! I hope that is said of me.
You likely already know who you are going to vote for in November, so let go of the election news and make a difference in your own and other’s lives. Watching the election news is not going to make your vote count more. I’m not saying that you should not be wise and knowledgeable, just don’t let the election take hold of you and drain you of life.
What steps will you take today to a healthier, more joyful, less stressed you? Take the time to assess your life plan and return on life (ROL) and please let us know how we can travel that journey with you.
Economic & Investment Highlights:
- The Federal Reserve (Fed) has recently made the shift in monetary policy and has begun to lower the Fed Fund rate in an effort to decrease the restrictiveness of the rates on businesses and consumers. Note: The Fed governors now believe one or two more 25 bps cuts are likely to happen this year. Always keep in mind that The Federal Reserve has a dual mandate to achieve both stable prices and maximum sustainable employment.
- China’s Recent Economic Stimulus Actions: Beijing announced on September 24th and 26th new monetary and property-market stimulus as well as a “living allowance” (cash handouts). The People’s Bank of China announced a 50-basis point cut in the reserve ratio (freeing up approximately $140 billion in liquidity) with more cuts likely in the future months. Mortgage rates are to be cut about a half of a percentage point in the near future as well.
- Inflation: Both the Consumer Price Index and Producer Price Index have cooled off substantially and that is a very healthy direction for inflation. Additionally, employment numbers are cooler, but importantly not too
- Fiscal Policies – As stated last quarter, this will be stressful and very interesting to watch the 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. I believe the market is continuing to price in a mixed result in November where no one political party takes control of all three.
- Recession Risks: Recessions are a painful (or at least a very uncomfortable) but a normal part of economic and financial market cycles. Unfortunately for those looking for certainty, predicting one is extremely difficult. Recessions have been predicted by market commentaries and political pundits every year for the three decades I have been in the investment management industry (in truth there have only been 13 economic recessions since World War II). We continually assess recession risk and the concerns it may bring. This uncertainty underscores the importance of diversification for both asset protection (as needed) and investment opportunities.
- Geopolitical Risks: The risk associated with our world leaders continue to be a focus. The continued war in Europe and Gaza, China’s ever-changing policies (including debt levels, tensions over Taiwan and AI chips), and other challenges will appear over time and keep the financial markets on their toes.
- Artificial Intelligence (AI) has waned in importance of investment and economic conversations recently, but it will continue to be a significant topic in the coming years. 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 12.93% price per ounce, and the broad basket of commodities was down 0.22% for the last 90 days. Oil was down 17.12% for the quarter.
- Bitcoin was up 5.86% 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 09/30/2024:
US Equities:
+ 5.89% S&P 500 (Index of the largest US publicly traded companies)
+ 3.68% Large Cap Growth – Morningstar Category
+ 8.04% Large Cap Value – Morningstar Category
+ 8.41% Russell 2000 Growth (Index of Small-cap growth US publicly traded companies)
+ 10.15% Russell 2000 Value (Index of Small-cap value US publicly traded companies)
International Equities:
+ 6.18% Foreign Large Growth – Morningstar Category
+ 8.16% Foreign Large Value – Morningstar Category
+ 8.08% Foreign Small/Mid Growth – Morningstar Category
+ 8.60% Foreign Small/Mid Value – Morningstar Category
Bonds:
+ 4.74% U.S. Aggregate Bond (Index representing intermediate term investment grade bonds in the U.S.)
+ 5.55% Corporate Bond – Morningstar Category
+ 2.72% Short Government – Morningstar Category
+ 2.48% Muni National Bond Intermediate Index – Morningstar Category
Other:
+ 12.93% Gold Price
+ 5.86% Bitcoin
– 0.22% Commodities Broad Basket – Morningstar Category
Current Annual Money Market Rates ending 09/30/2024:
4.73% Schwab Value Money Market
4.74% Schwab Treasury Money Market
Market Indicators:
Inflation:
2.89% as of July (Down 0.47% from 3.36% on 06/01/24)
Unemployment:
4.2% as of 09/06/24 (Up 0.2% from 4.0% in June 2024)
Fed Funds Target Rate:
4.75 – 5.00% as of 09/27/24 (Down from 5.25 – 5.50% as 06/20/24)
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).
