Hi there,
Welcome to our summer edition of the Highwater Wealth Quarterly Newsletter! We hope you're enjoying the warmer weather and taking some time to relax and recharge. As we dive into the heart of summer, let’s take a moment to catch up on what’s been happening in our world.
- Markets
Now that we’ve officially eclipsed the halfway mark of 2024, let’s look at what the first six months of the year brought us. The U.S. stock market has shown resilience despite a few bumps in the road. Major indices, like the S&P 500 and NASDAQ, have experienced some volatility, but overall, they’ve managed to move upwards. Key sectors such as technology and communication services have been standout performers, driven by continuous innovation and strong earnings reports. But beneath the surface of the “headline numbers,” performance hasn’t been as stellar. About 30% of the S&P 500 companies are negative for the year, and the “Magnificent 7” has contributed over 2/3 of the S&P 500’s performance year-to-date (FactSet). We have just recently begun to see improvement in other areas of the market and hope to see this expansion of participation continue. Relying on a small number of companies to pull the weight of the whole market just isn’t sustainable and leads to elevated risks to the market.
We DO EXPECT increased volatility in the SHORT term, especially given the political landscape at home and abroad, but we remain confident that our economy and stock market will continue to grow in the next 5 years. Our focus remains on the long-term and we’re keeping a close eye on market trends and adjusting our strategies to ensure your investments remain well-positioned. If you have questions about your own portfolio, don’t hesitate to reach out.
- Economy
Turning our attention to the broader economic picture, there’s a lot to unpack. The economy is currently navigating through a complex landscape marked by mixed signals. On one hand, we’ve seen employment and consumer spending remain strong. But “under the hood” there are seemingly endless risks that we are attuned to, and we plan to remain cautious in the near term. Employment, for example, is beginning to soften when you look deeper into the numbers.
Inflation, however, continues to be a hot topic. The recent data shows an inflation rate (Core CPI) hovering around 3.3%, which is decreasing, albeit slowly, but still above the Federal Reserve's target. This has led to a frenzy of predictions for potential interest rate cuts. Looking ahead, our team anticipates that the Federal Reserve may implement 1 or 2 rate cuts in the 0.25% range each before the end of the year. Our feeling is that it won’t happen until after the election. These potential cuts could provide some relief to borrowers and stimulate economic activity, fostering a more favorable environment for investments and growth, but we must point out that when the Fed typically cuts rates, something is wrong in the broader economy. Our team is continuously monitoring these economic indicators and is here to discuss our economic outlook with you.
A job we wouldn’t want: The Fed is walking a fine line trying to bring inflation down without “breaking” some other part of the economy. Cutting rates too early could cause inflation to reaccelerate, which is what happened in the ‘70s, but waiting too long could have a (potentially major) negative impact on other parts of the economy like employment. The Fed certainly has its work cut out for it. We are still feeling somewhat defensive, especially seeing how long we have gone without a meaningful correction in the markets.
- Stat: Investing and Politics Don’t Mix
“Hypothetically, the best-performing portfolio from 1900 to 2023 was the “bipartisan” one that stayed fully invested during both Democratic and Republican administrations. Starting with $10,000, this portfolio grew to almost $9.9 million.
A “partisan” portfolio, only invested during administrations of one party or the other in that 123-year span, underperformed by millions of dollars. The same $10,000 only invested during Democratic administrations grew to approximately $528,000. Invested only during Republican administrations, the initial $10,000 rose to just shy of $181,000.” (Invesco, Market Performance 2024 Presidential Election).
While this election cycle is important and top of mind for all of us for several reasons, regardless of where you fall on the political spectrum, it has very little impact on our overall investment strategy. Although this election may bring some added volatility, it will come and go, and life will go on. As has been proven time and time again, time in the market is far more effective than timing the market, and our investment strategy will continue to reflect that belief.
As always, the team is here to listen to your worries, election related or otherwise, and would be happy to review your portfolio with you and address your concerns.
Stay cool this summer and we’ll catch up soon.
Chris Reaney, CFP®
Founding Partner
Managing Director
Wealth Manager
Steward Partners
145 Maplewood Ave, Ste 100, Portsmouth, NH 03801
Direct: 603-427-8859 |Cell: 603-944-0873 | Fax: 603.373.8210
Email: chris.reaney@stewardpartners.com
Team Website: HighwaterGroup.stewardpartners.com
https://www.invesco.com/us/en/insights/market-performance-2024-presidential-election.html
The views expressed herein are those of the author and do not necessarily reflect the views of Steward Partners or its affiliates. All opinions are subject to change without notice. Neither the information provided nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. Past performance is no guarantee of future results
Keep in mind that individuals cannot invest directly in any index, and index performance does not include transaction costs or other fees, which will affect actual investment performance. Individual investor's results will vary. Past performance does not guarantee future results. Future investment performance cannot be guaranteed, investment yields will fluctuate with market conditions.
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