2024 Mid Year Outlook

Join us for an insightful mid-year market update where we dissect the unexpected strength of the current bull run. Our expert panel dives into the factors driving market performance, including the Fed's "soft landing" strategy and the impact of interest rates.

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Transcript

0:09

Let's go through your market update. What's going on. I mean, it's almost halfway through the year. It's hard to believe, right? I mean, we're approaching the end of June, so much of today's segment is going to be focused on what do listeners and investors do mid year. And honestly, you know, if you go back to where we started the year in January, and we were on this show, what do we say about what would happen in markets? And there's always prognostications. You know, I think we didn't expect it to be this strong. We were so jacked up for interest rate cuts, we just knew interest rate cuts are coming. This is maybe three this year, and we're still hoping. Right, right. Well, we might get one. But interestingly, you know, what's happened along that route is that markets have performed. Why? Well, largely because the Federal reserve, based on this interest rate dialogue you're, you're bringing up has sort of engineered what we're calling a soft landing. That is, they're bringing down inflation without putting us into a recession. And interest rates have remained no question, high. And so as we look forward, and I think these are the themes as we look forward at mid year that we're focusing on, we see the S&P 500 up double digits. The Nasdaq is leading the way, that index is leading the way, almost up 20% year to date, and the Dow Jones is lagging a little bit behind that with single digit growth. And, of course the bond, US bond aggregate not performing as strong as the stock market, which we'll talk about the impact of that in your portfolios. Nor is money markets now. I mean, everyone's sort of running to this 5% money market thing. When I compare that to what the S&P has done over the last two years there's about a 30% delta. It's nice to get guaranteed money, but you did leave some money on the table if you're doing just CDs and money markets. So as we look forward, we're going to today dig into what are the risks in the market and how do you apply them to your portfolio and your savings as we sit here mid year. All right, fair enough. So mid year outlook, that's what we're doing today. So the market's obviously taken off. As you mentioned, past performance doesn't guarantee future returns. What factors are driving this incredible bull run right now? We sort of talked on it. I mean, you, you said it. I mean, it has been all about interest rates over the last few years, particularly across the world. And the US is really nicely and disparately led the way in growth, both in the. Markets and obviously through monetary policy. So, you know obviously the fed engineering some sort of soft landing is helping, meaning we've not, we've not gone into recession. Jobs have mean unemployment's remarkably low, wage growth has increased. So generally, when you look across the US it's, it's a strong economic performance which has driven markets up and improved corporate earnings. Let's talk about risks. What do you see on the horizon? Yeah, yeah. I mean, the risks that we're speaking of in our investment committee are not dissimilar. I mean, if you link it back to interest rates, it's, you know, will policy, will fed policies stay on point? Will they manage interest rates so that jobs can continue to grow, that people can continue to earn more money? So that's one. There's also geopolitical risks out there. We have the Russia-Ukraine conflict still going. We have some alliances with China that we're watching closely. Thats certainly always a risk. On the geopolitical. Putin and North Korea, they're like best friends now. Yeah. I mean, you know, so these are the geopolitical risks that you're always watching. And you know, what those impacts could be. The other risks, of course, are the ones we don't know about, these exogenous risks. And if you look at the markets that what has impacted the market the most in the past, you know, 40 years, it's these exogenous events like 911, the pandemic the collapse of the financial system in 2008. So those are the ones we don't know about. The ones we. That we are thinking about certainly are in our way. And then obviously we have an election coming up, so we'll have to watch policy changes. But nonetheless you know, we're fairly- When you look at where we are mid year the risks are fairly low. We, you know, obviously, watching these. And, you know, I think the ones that, that could drive the most are interest rate or policy changes that we you know, that would impact interest rates and cause the stock markets to not go as strongly as they have in the first half of the year. All right, drill down a little bit, too, on some of the sectors and asset classes that are really doing pretty well right now. Tell us more. Yeah, well, I started off the segment talking a bit about the indices. So, you know, like, if you think of the Nasdaq that is mostly a tech index. And so that one is up 20%. So what's driving it? Well, there's these themes like artificial intelligence and essentially growth stocks. So whether it's Nasdaq or the S&P 500 growth stocks are really driving these large company growth stocks are driving the indices stronger largely because they're able to have the capital to invest, see growth and take advantage of these trends in artificial intelligence and that is really driving markets up because that those earnings, they're achieving unprecedented earnings which is how their valuations go up and how their performance for their actual stock is improving. How about should we again mid year? Look, we're taking a look at our situation here. Rebalancing any re readjusting here. Yeah, I mean it's something we would always recommend to our clients because over the last few years you've had this disparity I was just talking about when I mentioned the three stock indices really up strongly yet the bond index not and so when that happens if you're I'll give this. The classic 60 40 portfolio, 60% equities, 40% bonds. Youre probably overweight equities right now, overweight stocks, because you essentially have, those have grown faster than your bonds. So you're probably taking more risk than maybe what your profile, if you're in a 60 40 would be. And so therefore, you have to go in and look at your 401K, maybe do an auto rebalance through your provider. But I think the most important thing, Gary, when you consider it mid year is, is your risk tied to your goals? What are you trying to accomplish both in the short term and the long term? And when you think of those, are you in the risk profile to achieve the goals? Okay, sounds good. All right, so again, final takeaways for listeners today. Last word. What do you got? It's mid year. The markets have performed generally pretty good. However, there is disparity in them. So look at and talk to your advisor about how you're allocated and make sure you're in the parts of the market that have done quite well. And when you do that and where they're going forward, when you do that, adjust it to your goal and make sure your financial plan stays on track. And that is a nice thing to do. Mid year, it's kind of like, you know, it's half time of the Celtics you know, championship, and you have to look at what's working and what's not. And if you don't, you're just letting, you might be leaving money on the table. All right. Always good advice, Jim. Always great to see you. Thank you for coming by today. Yeah, nice to see you. 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