[Market Recap] Cup of Joe: May 2024 Market Update

Markets in May

• Headlines have dominated the market the past two months and the week-to-week market direction has been manic.
•  $10,000 invested in the S&P 500 in 1970 grew to over $2.6M at the end of March 2024, ignoring fees and taxes.  During that period of time:
• • From 1965 to 1981 the top marginal tax rate was 70%.  Only after 1987 did it come down under 40% where it has been since.
  • Interest rates were above effectively above 5% from 1972 to 1991.  Almost 20 years, during which the market was up almost 8x!
  • Price Corrections (a 10% decline in the index level) happen, on average, every 22 months.  We usually don’t even make it 2 years without a bumpy drawdown.
  • There have been 8 US recessions since 1970 an average of 1 every 6.6 years.
  • This period of time is littered with headlines both bad and good: terrorist attacks, war, natural disasters,  the birth of the personal computer, the fall of the Berlin Wall, and the invention of the iphone.  But the point is that the market perseveres.

• We find ourselves in a time where things are generally ok… Equity markets are positive, US GDP growth is positive, unemployment rate is still really low.  We are just experiencing a lot of mixed signals which can sometimes be confusing and unsettling for investors.
• Headlines cause short-term movements

• • 2023 was a great year but it wasn’t a straight line to +26%.
  • Also, when stock prices advance a lot, they take a breather.  And that’s what we saw with the market in April.
  • Think of headlines as tea leaves.  Don’t look at any one of them as the thing that’s going to change everything.
  • Staying invested is the most important thing you can do.

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Joe Gallemore, CIMA®, Partner
Director of Investment Management

[Market Recap] Cup of Joe: April 2024 Market Update

Markets in April

• March saw stock markets rise again with the S&P 500, NASDAQ, and DJIA indexes all closing Q1 at or near all-time highs. But there’s a lot going on underneath the surface.
• A lot of economists and strategists have been predicting a slowdown in the US economy, instead it’s almost been the opposite of that. Many data points are coming in showing the US economy continues to be strong and resilient; at the same time the Fed is saying they will not cut interest rates before they are convinced of the inflation data.
• This tug of war is causing persistent volatility week to week. And this past week, the S&P 500 had back to back days of 1% moves in opposite directions.
• Nowadays the stock market is reacting to every little thing. The best thing to do is buckle your seatbelt and be patient. And in today’s stock market turbulence can come from a myriad of places. But as we’re seeing this year, even through pockets of volatility, the market will rise on positive news. And the labor market, US consumer, and economy at large have all remained unexpectedly strong.
• Keep in mind that this stuff is impossible to predict. The market is sensitive right now and we think simply knowing that can help you stick to your investment plan, by not overreacting when the market over reacts.
• Investing is hard, due in equal parts to 1) not knowing what’s going to happen, and 2) having to live with the uncertainty. Too many bad investment moves are made when an investor can’t calmly handle an emotional response to short term volatility and instead remain patient. And all volatility is short term.
• So as the Macro landscape continues to change, if the market remains choppy, which we think it will, remain patient and confident. These environments typically present very good opportunities for active stock strategies and provide us good opportunities for rebalancing.

Joe Gallemore, CIMA®, Partner
Director of Investment Management