Our mission is to help you Preserve Your Assets and Protect Your Lifestyle. Our newsletter aims to educate you on the economic environment and provide life perspectives and financial planning ideas to help you!

As always, your well-being is everything to us. Please contact us anytime if you have any questions about your financial or investment plan. 

Quarterly Market Review: Q2 2024 Investment Viewpoints

Below are some key observations from three of our research partners along with an outline of our conclusions. 

iM Global Partner’s Market Slides

a.  We believe inflation has peaked and over the near-term will trend lower towards the Fed’s long-term goal. Interest rates have also peaked for this cycle. The economy is relatively healthy for the time being, though the risk of recession rises in the second half of 2024 and into 2025.

b. U.S. core bond yields have increased and now offer more attractive return potential and increased downside protection. Credit remains attractive as well, with yields in the upper single digits.

c.  At the beginning of the year, the market priced in a greater than 70% chance the Fed would cut rates to 3.5% to 4% by the end of 2024. As of March, expectations are now concentrated in a range of 4.25% to 5%. Stronger than expected economic growth combined with inflation above the Fed’s preferred 2% target have changed the markets’ expectation for rate cuts.

NDR Digest

a.  Global Asset Allocation Current:
i.  65% stocks (Overweight compared to 55% benchmark)
ii.  5% cash (Underweight compared to 10% benchmark)
iii. 30% bonds (Underweight compared to 35% benchmark)

b. Despite the Fed keeping rates steady, financial conditions have eased over the past year, as indicated by various metrics such as the Chicago Fed National Financial Conditions Index reaching its lowest level since February 2022. This easing is supported of equity prices and economic activity.

c. Now, as the stock market enters historically weak periods beginning in February, March, and April, signs point to a potential consolidation or correction. Excessive optimism adds to these concerns, with new highs across markets, sectors, and stocks fueling a prolonged period of optimism since mid-January.

Schwab Market Perspective

a. There are early signs that some previous "rolling recessions" across various sectors or geographies in the United States are starting to turn into rolling recoveries. One of the sectors that first entered its own slowdown (in late 2022 and into early 2023) was the manufacturing sector. The key for the rest of this year is whether the coming strength in manufacturing can offset any coming weakness in services—essentially, the inverse of what we've seen over the past year.

b. The 10-year Treasury bond yield is near the highs of the year, responding to stronger-than-expected U.S. economic growth, rising inflation fears, and diminishing expectations for Federal Reserve rate cuts. Investors are concerned that the "soft landing" in economic growth and inflation that has prevailed over the past year may be in danger of turning into an inflationary growth spell. These concerns could mean a slower pace of Fed rate cuts and a higher ending point in this cycle.

c. We continue to anticipate two to three rate cuts by the Fed in the second half of the year. Despite current concerns, many inflation indicators are encouraging, leaving room for a moderate easing in policy. In the labor market, wage gains have declined and leveled off despite strong job growth, suggesting that the supply of labor is keeping up with demand. The "quits" rate—the measure of how many people leave their jobs voluntarily—has fallen over the past year as the labor market has cooled off. It has been one of the more reliable leading indicators of inflation in this cycle.

Our Conclusions

-  With the last mile of falling inflation to 2% proving to be a bumpy road, the Fed will remain tough and not want to err in easing too soon. We see only 2 rate cuts in 2024 as the Fed attempts to engineer this soft landing. The economic data does not warrant additional cuts and we do believe that this Fed does not want to return back to its ultra accommodative policy ways.

-  The stock market has been very rewarding and giving. We are not predicting doom and gloom but do remind clients that markets aren’t always rewarding and can taketh from you. Returns have been north of 11% for the last 1, 3, 5 and 10 year periods as of the end of March 2024, 10.56% in the 1st quarter alone….good times don’t last forever.

- Traditional bonds have had a rough stretch the last 3 years. We think investors would stand to benefit from recognizing when bonds are providing the features that this investment is best known for. It now provides a respectable income, better asymmetry of returns, and a greater capacity to hedge equity markets volatility than it has for the past two decades.

If you have questions about your portfolio, please contact us anytime. 

This Is Life

By: Pat Guinet, CIMA®

“Will You Still Need Me, Will You Still Feed Me, When I’m 64!”
– The Beatles

The song “When I’m 64” was published as part of the Sgt. Pepper Lonely Hearts Club Band album released in 1967. It was one of the first songs written by Paul McCartney in May 1956 at the age of 14. If you get a chance, do an iTunes search for the song and listen to its lyrics. Not surprisingly, the song describes what a 14-year-old Paul thought turning 64 would mean in life: slower pace, less relevance, tons of free time, and the beginning of one’s sunset years.

If you remember the tune, there is a good chance you are in your 60s or possibly even older ….. Unless you are my partner Hung Nguyen…... One of the ways we bonded early in our relationship was his love of older music. He knew the Beatles, and appreciated the music. I truly believe he has the DNA of an “old soul”, unlike myself who is simply on his way to becoming 65; one year away from what many consider to be retirement age. Casey always amazes me with his willingness to “go deep” in financial matters and financial modeling. We all recognize our strength is in the collective knowledge we bring to each of you as partners at GFP.

It's possible that McCartney’s view of aging may have been accurate back in 1956, but I can unequivocally tell you that at 64, I feel very young with much living left to do… My belief is further supported by the many conversations I have with each of you when doing quarterly reviews. It’s clear there is more to answering what is involved in truly enjoying retirement than simply the “numbers.”

Further adding to my conviction is a conference I recently attended in Miami Beach, FL, where the discussion centered around aging and health. I was surprised to learn that our view of retiring and aging could change dramatically in the next few years due to the emergence of Generative Artificial Intelligence (GAI). GAI takes AI to an exponential level. GAI teaches and learns from itself, unlike AI, which simply crunches data. The presenters at the conference believed GAI could extend life expectancy for 1 out of 3 people in their 60s to 110 years with the discovery of anti-aging treatments. GAI was also going to help speed up discovering a cure for Alzheimer’s and Dementia in the next 2 – 4 years. Most importantly, GAI could effect the kind of change in the next 5 years that many of us in our sixties experienced over the last 40 years.

There is a great four-part series on Netflix called Live To 100: Secrets of the Blue Zone. Here’s a link to its trailer on YouTube: click here. It’s a great place to start if you are looking for ways to live longer, happier, with purpose and relevance.

Through conversations with many of you, I have realized we are all trying to figure out what retirement means.  We all have many more years, if not decades, of living to do. We are healthier and more active and are certainly going to be one of the biggest beneficiaries of GAI and its contribution to our health and well-being. Do not settle for the old definition of retirement. Recognize there is much living, giving, and productivity beyond and before the retirement age of 65. Take a moment to figure out what best suits you, and simply bet on the fact you are going to live much longer. Paul McCartney’s perception of what it means to be 64 is simply antiquated. Great song, but maybe we need to change the lyric to “When I’m 104.”

All the best,

Pat, Hung, and Casey

Education to Empower You: College Planning

If you or someone in your network is a parent of one of the over 18 million students headed off to begin or continue their undergraduate studies this fall, it's essential to plan wisely to ensure a smooth transition in and through the college years.

Here are some practical tips to consider: 

Budgeting basics: Encourage your student to create a budget, outlining their expenses (i.e., tuition, books, housing, food, and miscellaneous costs) and adjusting it each year as necessary. 

Educate about responsible borrowing: Knowing the implications of student loans and the importance of borrowing responsibly is crucial. Talk honestly and regularly with your student about the long-term impact of student loan debt on financial goals post-graduation.

Explore or revisit financial aid: Securing financial aid isn't a one-time affair — it's an ongoing process. Every fall, revisit your student’s financial assistance, from scholarships and grants to student loans. Keep in mind the Free Application for Federal Student Aid (FAFSA) must be completed annually to ensure continued support throughout college.

Understand your tax-advantaged savings plans: If you have a 529 plan or Coverdell Education Savings Account (ESA), ensure you and your student know how to use it.  These accounts offer tax benefits and can help offset the burden of tuition and related costs, but distributions must be used for qualifying expenses. 

Consider part-time work: While focusing on academics is essential, encourage your student to consider part-time work or internships to supplement their income and gain work experience. 

Take advantage of student discounts and resources: Apple, Verizon, Sam’s Club, and Amazon Prime are just a few of the companies that offer education discounts. You can find a comprehensive list here to help your student maximize these opportunities. Additionally, encourage your student to utilize campus resources such as career services and financial literacy programs.

Plan for post-graduation repayment: Whether graduation is one or four years away, help your student develop a plan for post-graduation loan repayment, considering factors such as income-driven repayment plans, loan consolidation, and strategies for accelerating debt repayment.

Prepare for emergencies: Establishing an emergency fund is crucial to prepare for unexpected expenses that may arise during the college years. Additionally, consider creating essential legal documents such as a power of attorney, a living will, and a HIPAA authorization for your young adult.

We hope these tips provide helpful insights. If you have any questions, please contact us below.