Printer Friendly PDF: 2024 Q4 Nvest Nsights Newsletter which also includes benchmarking and data on investments widely utilized in our current tactical strategies.

2024 Year in Review | Steve Henderly, CFA

There was no Santa Claus rally to conclude 2024. In fact, away from the largest technology names which permitted indexes like the size-weighted S&P500 to move upward, the average stock received a few lumps of coal in December.  But even without a year-end rally, 2024 exceeded the expectations of most investors.

Twelve months ago, the S&P500 stood at a level of 4,770 and the average strategist’s target for 2024 was an advance of just 2%.  A variety of concerns led the consensus to project a relatively mild return in the stock market as we entered 2024.  Along with inflation and interest rate uncertainty, 40% of voters around the globe would choose new leadership; the most in history.  Talk about uncertainty!    Despite these concerns, the S&P500 leapt roughly 24% and logged 57 record highs to close at a level just shy of 6,000.  How can the consensus so often miss the mark?

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Turbulent Ascent Continues | Steve Henderly, CFA

Despite a bumpy journey, investors experienced attractive growth during the 3Q with the S&P 500 rising by 5.9% to reach a new all-time high.  Client portfolios benefited strongly with both stocks and bonds enjoying price appreciation.  This coincided with the Federal Reserve implementing its first rate cut after a year-long pause.Continue reading→

Click here for a Printer Friendly PDF which also includes benchmarking and data on investments widely utilized in our current tactical strategies.

Game Point! | Steve Henderly, CFA

Tennis great Roger Federer won nearly 80% of the 1,526 singles matches he played over his career.  Yet you might be surprised to learn that he won just 54% of the points in those matches!  Even top-ranked tennis players win barely half of the points they play… which also means they lose almost half of the points they play.  Interesting.  In Charles Ellis’ book, the “Loser’s Game”, stock market investing is likened to the game of tennis.  In that book, he explains that success is determined by avoiding big mistakes and keeping the ball in play rather than by attempting aggressive hits.  We can’t help but feel the analogy aptly applies to the deceptive allure of the S&P 500’s performance YTD – where performance is being driven by the spectacular gains of a few mega-sized tech companies.

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Highlights from our latest Nvest Nsights newsletter:

• The Bumps We Climb On – If you knew stocks would experience two bear market drawdowns over the next four years, would you be willing to own them in your portfolio?
• The Next “Financial Eclipse” – Just as the moon veils the sun’s brilliance, we will all experience various “financial eclipse” events in our life.
• Mission (Not Yet) Accomplished – Inflation data disappointed to the high side two months in a row suggesting the Fed should not rush to cut interest rates, yet markets marched higher.  What lies ahead?

Click here for a Printer Friendly PDF which also includes benchmarking and data on investments widely utilized in our current tactical strategies.

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M&Ms candy was first introduced to the public in 1941, inspired after Forrest Mars Sr. relocated his Mars candy company to England and encountered British soldiers eating small chocolate beads encased in a hard sugar shell.  This shell prevented chocolate melting in the heat of summer (melt in your mouth, not your hand).  A couple other interesting facts: M&Ms were sold exclusively to the US military during WWII.  Between 1976 and 1987 there were no red colored M&Ms and the color blue was not added until 1995.  M&Ms were the first candy to travel into space (1981).  Who doesn’t like M&Ms?

Reflecting on investing in 2023, it might be appropriate to label it the year of the M&Ms.  That’s because two investing themes dominated investor behavior throughout the year: Money Market Funds and the Magnificent 7⁽¹⁾.

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After a nice start to 2023, the market soured in the 3Q.  Both stocks and bonds struggled against a backdrop of too many conflicting signals.  Some data such as resilient employment and consumer spending suggests inflation is easing and economic recession may be avoided; but a contracting money supply, abruptly rising interest rates and energy prices, and uncertain government spending suggest economic pressure is building and is causing stock prices to contract.

Hamas’ attack on Israel over the weekend (on top of ongoing situation between Russia/Ukraine) seems to create additional fog in the short-run.  We’ll continue to monitor what these developments may mean for the market.  In the meantime, this quarter’s newsletter reviews:

• “Too Many Moving Parts” – we explain how many different moving parts not functioning together, can create a frustrating market environment with elevated volatility but no apparent trend.
• “New Reality” – Interest rates are now at their highest level in 16 years.  While it feels unfamiliar, history would suggest rates at this level are not a bad omen for the future, but they do not make economic conditions easy either.  How long might rates stay high if inflation is improving and what does it suggest for financial assets?
• “Flying Blind – Ecstatic Appreciation” – Bill offers quick reflection and appreciation for the opportunity to work with so many wonderful clients over his 45 year career.  As throughout life, “Flying Blind” also offers relevant parallel as investors often feel foggy about the future.
• “The Wealth Feedback Loop” – the wealth effect can cause individuals to alter their consumption behavior, and we discuss why it is important to balance significant financial decisions with actual income rather than fluctuations in net worth due to market variables.

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With the midpoint of 2023 now crossed, we hope that your summer is off to a nice start.  For the financial markets, things certainly appear better behaved compared with a year ago.  In fact, the rebound over the last 9 months is now being labeled by financial media a “new bull market”… yet narrow enthusiasm from just a few stocks casts doubt on that idea.  Below are links to access our just published Nvest Nsights newsletter articles, and your personal investment reports will be arriving soon.

• “Lift-off! Do we have Lift Off?” – provides a quick recap about how the 10 largest US stocks is influencing the appearance of broad index performance.
• “Quandary in the Quarry” – Economic indicators continue to signal slowdown is on the horizon?  Can the current stock market advance continue and participation broaden?
• “Driving Hands-Free” – AI, or Artificial Intelligence, garnered big hype in the 2Q; the idea of automation everything inspires long-term hope for new gains in productivity, but also creates anxiety.  Another form of AI, hands-free driving, can also be likened to how many approach investing… but is it safe?
• “Personal Finance Corner” – An update on how ebbing inflation is beginning to impact savers via iBond rates and what to expect if continued improvement occurs.  Also, we briefly review how large or lumpy withdraws can be accompanied by unwanted surprises from Uncle Sam.

Click here for a Printer Friendly PDF which also includes benchmarking and investment data.

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We are encouraged by the beginning of Spring weather, and hope this note finds you the same.  For investors, both stocks and bonds finished the 1Q with gains, but it was anything but easy.  Stocks vaulted higher in January on renewed hope from investors that the Fed just might stick the proverbial ‘soft landing’ for the economy and be able to end its rate hiking campaign.  But in February economic data remained just too-hot and was again viewed as “bad”, counter to the idea the Fed could stop or even slow its tightening, sending the markets quickly back down.  As the bond market quickly priced-in additional rate hikes to come from the Fed, two “weak-link” banks broke in early March and ushered in several weeks of fear about the viability of the global banking system.  Quick steps taken by policy makers seemed to calm those worries and permitted stocks to claw back into the black by month-end.

But where do we go from here, and what should investors make of recent market performance and confusing sector leadership?  This quarter we offer the following brief articles:

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