Blog

Given the recent market volatility, Ed and I wanted to provide a quick update to offer some perspective by highlighting previous periods of market turbulence. While predicting future market movements is impossible, historical context can help us understand current trends.

As I started to put the proverbial pen to paper this weekend, many thoughts were bouncing around. With the news events of Monday morning, nothing really changed. They got a little more “arm wavey” with the headlines screaming at us, but we are still where we are.

Despite the national headlines, markets have quietly moved higher, defying the media craze. With interest rates at near two-decade highs, much of the movement in the market has been driven by growth stocks and anticipated interest rate cuts. This positive trend comes as we approach one of our more contentious election cycles. Throughout this ranting, I'll present a quick market recap, highlight a potential investment rotation that’s occurring, and conclude with a few market-related data tidbits from previous election cycles.

The second quarter of 2024 has come and gone with little fanfare or actual movement. Despite the media drumbeat of “concern”, there was little volatility, and most portfolios ended the quarter unchanged or slight up/down. The lack of volatility is rare but welcomed.

Although many of us hesitate to plan for a future we won't be around to experience, a well-thought-out estate plan is essential for managing and preserving assets during life and directing their distribution at death. Basic estate planning is for everyone. It allows you to determine how, when, and to whom your assets are transferred while achieving your specific tax and non-tax planning goals. Additionally (and most important), for the mid to high net worth couple, advanced estate planning can secure assets from creditor claims, it can provide a safety net for outspending your money and can be an emergency “break glass” against future financial problems.

One lesson learned as a byproduct of 30 years (almost) in the financial business is that when things are “expected” by the masses (and the cacophony of talking heads)….. it usually doesn’t happen. Best evidenced by the almost yearlong soap opera of “when is the Fed going to cut interest rates”…. As we have opined, not soon and not until the right time. 

As we conclude the first quarter of 2024, markets have regained momentum, and we think it's a fitting to not only to look ahead but also review and highlight our recent portfolio rebalance.

As mentioned repeatedly, in mid-March 2024, we executed a tactical allocation adjustment coupled with a rebalance.This marked our first rebalance since October 2022.

As of this writing, the equity markets continue their march northward. Gone are the days of despair and market declines. The great unwashed masses are again piling into the growthiest stocks looking for the fastest gains. All kinds of goofy investment vehicles are being advertised on social media. Crypto is back en vogue. Certain stocks and market sectors have gone parabolic. The pundits have all but guaranteed a Fed rate cut and have promised it to be rocket fuel to the moon. Ahhhh, it feels like 1999 all over again!

As we (and others) have opined, the interest rate cycle is thee most important factor driving the markets. Many of my client conversations have revolved around this. The game of “projecting when the rate cuts happen” has been a thing for a couple of months. As we learned today (2/13)…. Interest rates are the tail and not the dog. The dog is the economy….And the economy has (so far) stayed stronger than most expected. The reasons are many (credit card and Klarna spending, parental financial support, and an attitude of entitlement when it comes to self-satisfaction)… but that’s a topic for a later rant.

While 2023 ends with the proverbial bang…. and an equity rally in Q4 has confounded the so-called experts, it leaves many questions looking ahead. Why did the markets rally so much, why did interest rates start to come down, and why does any of that make sense if the real economy is, in fact, slowing (or worse)….. Glad you asked...