Regardless of extended valuations, large-cap equities continued their upward trend in the third quarter. The “Magnificent Seven” (the moniker for a group of technology-related megacap stocks) have disproportionately led the rally for the past several years. That seemed to change this quarter: only three of the Mag 7 names beat the Index return (the rest were in negative territory). Mid- to small cap equities, while bouncing nicely off their recent lows, continued to trail large cap—extending the longest underperformance period in history while sporting significantly lower valuations.

As we enter the second half of 2024, lots of changes are potentially on the horizon, in my opinion. The first half of the year saw continued domination by a narrow group of technology companies primarily focused on artificial intelligence, or AI. This arms race between the biggest tech companies continued in earnest through the end of Q2, dwarfing most of the other companies in the S&P 500 and leaving small caps in the red year to date.

Wall Street got off to a fast start to kick off 2024. Investors were encouraged by strength in the economy, the likelihood of interest rate cuts (possibly beginning in June), and opportunities in artificial intelligence. Indexes reported solid first-quarter gains, led by the S&P 500 and the Nasdaq. Several indexes reached new highs throughout the quarter. The S&P 500 hit its first record high in two years late in January, leading to its best first quarter performance since 2019.

Americans love credit, and rightfully so—use someone else’s money to pay for goods and services and pay them back when the balance is due. But anyone who’s received a new credit card recently and actually flipped through the included mountain of paperwork may have noted the interest rate on unpaid balances. According to Lending Tree, the average credit card interest rate Americans paid in March 2024 was 24.66%.

As we closed out 2023, the markets reacted to the positive news that the Fed had finally pivoted from its rate hike cycle to holding rates steady and making cuts in 2024. In fact, at his last 2023 press conference, Fed Chair Powell said there could be up to three rate cuts in 2024. In my opinion, given the weakening backdrop of consumer spending, which is 70% of US GDP, we are likely to see more than three rate cuts in 2024. But when? That is the question that has been on investors’ minds as the markets sold off approximately 5% in the first few days of the new year

When everyone seems to expect a soft economic landing after the unprecedented rate hike cycle in which the Fed has engaged for the past 14 months, brace for impact. That is the lesson of recent economic history, and it’s an uncomfortable one for the U.S. right now. There are a multitude of reasons to think that the unwinding of 14 years of easy money—with the Fed pegging rates at zero and four episodes of quantitative easing, the last one right when COVID hit—would not be an easy process. And it is proving to be just that, an extremely difficult undertaking with no historical precedent. The Fed itself admitted such at its last meeting. The reasons are many and varied: the cessation of COVID-era stimulus payments to consumers, the reinstatement this month of student loan payments, government shutdown worries, war, supply chain disruptions, higher oil prices, tighter credit standards from stressed banks, the highest consumer debt on record, and mortgage rates approaching 8% (from 3% early last year). The list seems to keep growing.

Equities in the first half of 2023 continued to disconnect from a worsening economic backdrop as profit warnings and rising rates dealt a blow to soft-landing scenarios. Growing corporate profit warnings (especially from consumer-facing companies) and the seemingly resilient markets could be sowing the seeds for fragility down the line. The most expected recession in history is still not upon us, but many economists currently believe that recession will come, when the lag effects of the most aggressive Federal Reserve rate hikes in history eventually start to take hold.

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Bill Davis, CEO discusses the Fed’s balancing act and what impacts may occur. Brant Jones, CFP® comments on how the Secure Act 2.0 makes 529 plans more valuable.

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Silicon Valley Bank’s stunning demise sent shock waves across the banking sector as well as the broader financial markets. The Fed’s overaggressive rate hikes (the largest percent increase in history in a short period of time), combined with some banks buying treasuries at low rates prior to those rate hikes, has led to large unrealized losses in those treasuries.

There’s good news for your retirement plan! Starting this year, the age at which you must start taking required minimum distributions (RMDs) from your tax-deferred retirement accounts has increased from 72 to 73 years old. In 2033, it will increase again to age 75.

During Q4, investors continued to dump equities at a record pace as major central banks signaled that they won’t be deterred in their fight against inflation—a fitting end to the worst year for world stocks since the 2008 global financial crisis.

The concept of long-term commitment is easier to think about than to accomplish. The world we live in today provides no shortage of instant information at our fingertips, leaving us with little need for the mental exercise of PATIENCE. Most people agree that a long-term strategy is the right choice in terms of investing, careers, or relationships.

“Move Through Cancer”

As we enter the final quarter of 2022, investors continue to battle the worst bear market since The Great Recession of 2008 as both the stock and bond markets probe new lows for the year.

As the second quarter came to an end, we witnessed one of the worst periods in investing history. Below are some of the unpleasant facts about the first six months of 2022:

• The S&P 500 had its worst six months in 52 years

• The NASDAQ had its worst six months in its history

• The Russell 2000 also had its worst six months since the index was started in 1984

• Bonds also had one of their worst periods as well, declining double digits

• Inflation registered the highest rates since the early 1980s

The point is not to predict every bear market or crash, but to psychologically prepare for them in advance. Anyone who tells you they can correctly time the market on a consistent basis is either lying or senile. Knowing that a market correction can and will occur is half the battle and therefore must be taken into consideration when it comes to your investments.

A multitude of negative factors set U.S. stocks up for a difficult start to 2022, with the S&P 500 recording its worst January since 2009 and officially hitting correction territory in February, which led to the worst Q1 in more than three years. Growth-oriented stocks were at the epicenter of the pain amid fears of rising rates and a slowing economy. According to Bloomberg Analytics, at the end of Q1, the percentage of NASDAQ stocks down 50% or more hit a new record—more than 60% of the index, a record not seen since the 2000 Tech bubble.

The U.S. inflation rate was already approaching 8%, and then came war between Russia and Ukraine—two countries that generate a large share of agricultural commodities and energy that are consumed throughout the world.