Q2 2024 Newsletter

Spring is here! It’s always nice to see new growth and color return to nature. We have had a very strong market to start 2024. The current rally began back in late October had has been remarkably steady all winter. Recent economic data shows the economy is stronger than anticipated with consumers leading the way. Federal Reserve Chairman Jerome Powell recently stated that it appears both legal and illegal immigration has added enough demand to keep the economy from slowing down. In fact, in certain sectors, inflation has started to rise rather than fall as anticipated. This means the Federal Reserve is likely to delay raising interest rates. Inflation continues to be a key indicator for the Federal Reserve. Below is a recent chart from Goldman Sachs showing inflation data.

2024 1st Quarter Review

The best word to describe the first quarter of 2024 is optimism. The stock market went up rapidly and the bond market went down a bit as described below. The Federal Reserve left interest rates constant as inflation has crept back into the economic equation.

2024 2nd Quarter Preview

The volatility we anticipated in the first quarter has a higher chance of showing up in the second quarter. The Federal Reserve Lending Rate is likely to stay the same. This means a delay of interest rate decreases due to an uptick in inflation. While inflation may increase, it probably won’t go as high as we saw in 2022.

US Stock Market

Many analysts projected the S&P 500 index to finish the year at 5,200-5,400. The chart below shows the S&P 500 growth during the first quarter. With the stock market already at projected highs for the years, what will happen for the rest of 2024? Some companies have raised their projections, while others have not. We anticipate a more volatile market with little growth. This means we should rely more on dividends and look for entry points to increase stock holdings. Navigate Private Wealth’s risk allocation models look for both. It does not mean sell stocks. The old adage, ‘time in the market is more important than timing the market’, couldn’t be more appropriate than now.

Bond Market

The Aggregate Bond Index has dropped over the first quarter. The bond market has anticipated lower interest rates due to a lack of economic activity. However, that has not happened making bonds an even better value. As we reported last quarter, most bonds are priced below par (the issue price). We still like bonds and believe there is very good value over the next several quarters if not years. Below is a graph showing the Aggregate Bond Index in the first quarter.

International Stock Market

International stocks lagged the US during the first quarter. Navigate Private Wealth has not held international stocks in most of our portfolio models with only small holdings in the moderately aggressive and aggressive models. Some analysts are starting to talk about international stock catching up to the US. However, there isn’t enough economic activity to make us increase our
holdings at this point.

Did you know?

There is a lot of talk about record high amount of debt in the US economy. While that is true, is it harmful? As the economy grows, debt can increase. The key is not the amount of total debt, but the level of debt as a percentage of disposable income. The graph below shows that debt is at relatively low levels vs disposable income. Households are sitting on a lot of home equity.

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