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[Market Recap] Cup of Joe: December Market Update

1.   2023 has generally been a good year for equities, but be mindful of index concentration

  • As of 11/30, for 2023 just about all stock indexes are in the black.  The S&P 500 is up a handsome +20%, but that’s not the case for most of the other equity asset classes.
  • We spoke a lot this year about the major US large cap indexes becoming more concentrated in the largest names. Performance for the S&P 500 and Russell 1000 indexes has been dominated by the Magnificent 7.  As of 11/30, the Mag 7 stocks are collectively up over +65%. The remaining stocks in the S&P 500 are up around 9%.  S&P Midcap 400 is +7.1% and S&P Small cap 600 is +2.9%.  Point is, there has been a WIDE disparity in performance outside of those 7 largest stocks.

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    2.   Great time to be diversified

  • I’ve been listening to a lot of investment strategist calls, which include outlooks for 2024, and a common theme I’ve observed is that there seems to be many buying opportunities in both stocks and bonds.
  • In stocks, outside of the largest US companies, many pockets are trading at or below their historical averages.
  • In bonds, the current high interest rates can provide some nice income as a baseline return.  And the prospect of future rate cuts is attractive for owning bonds as well because when rates go down, prices go up.

    • So though a prudently balanced portfolio has faced challenges in recent years, the current outlook for diversification looks promising.

     
     
    3.   Takeaways from our Investment Committee

  • In the 4th quarter, as the risk of a recession in the US remained substantial, we trimmed exposure to the more sensitive assets classes and maintained the hedge on US large cap stocks.

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  • At our most recent meeting we discussed adjusting investments in the bond portion of accounts to take advantage of when interest rates are eventually lowered.

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  • Also we’ve had thoughtful discussions on how our portfolios are built to weather a potential recession and/or market corrections, and additionally what to do next after those risks dissipate.

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    Joe Gallemore, CIMA®, Partner

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    [Market Recap] Cup of Joe: November Market Update

    Recent Investment Focus webinar with the St James Investment Co.
    We talked about how interest rates affect stocks, about the Magnificent 7 making the S&P 500 more concentrated than it’s ever been, and we talked about St James’ patient, time-tested approach to value investing and how owning great businesses helps clients in the long-term. Watch at your convenience at ArgentBridge.com.

    Financial Planning Year-End Punch List – a few things you can do to help you work towards better outcomes

    • Assess any changes – Make a list and bounce it off your advisor.
    • Give your taxes a little thought – if you got/are getting a good bonus, made more than you thought, had some windfall income, let your advisor know.
    • Review your budget for accuracy – Leads to better planning for the future
    • Make sure your company retirement plans are fully funded!/li>
    • Charitable giving – If you want to gift, to charity or loved ones, tell your advisor! There’s lots of giving strategies out there and we want to help you make the most of your generosity.
    • Year-end not necessarily a time to shuffle your investments. Historically the months in Q4 and Q1 are relatively strong. Make that discussion a year-round one with Argent Bridge.
    • I-Bonds – Is it worth owning?
    • I-bonds purchased in the last few years may be less competitive than current US Treasuries that can be locked in.
      Each I-bond is different and the time it was purchased and the length it’s been held needs to be considered.
      If you have I-bonds, show them to your advisor, let us take a look and see if there’s a way we can improve your outcome.
    • Focus on your spending- Maintaining your normal spending plan, when funded by distributions from your investments, eats up bigger chunks of your assets when the markets decline.  So adjusting your spending is a great way to improve your investing outcome.Thank you for your continued trust and partnership. 


      Joe Gallemore, CIMA®, Partner

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    Article: The Power of Gathering Documentation

    Divorce can be a challenging and emotionally charged process, but being well-prepared with the right documentation can make all the difference in ensuring a smoother and more informed journey. As a divorce financial planner (and divorced mom), I have witnessed and experienced firsthand the importance of gathering essential documentation during divorce. In this article, I’ll share some insights on the significance of this process and the key documents you should collect.

    Why Gathering Documentation Matters:

    Gathering documentation is the foundation of a successful divorce case. It provides a clear and comprehensive view of your financial situation (income, expenses, assets, and liabilities), which is crucial during property division and for determining spousal and/or child support. Additionally, having organized and complete documentation can save time, minimize disputes, and reduce stress during the legal proceedings.

    Key Documents to Gather:

    1. Financial Documents: Begin by collecting all financial records, including bank statements, tax returns, investment account statements, and details of any additional sources of income. Having a thorough understanding of your financial position will empower you to negotiate from a position of strength.
    2. Property and Assets: Document all marital and separate properties, vehicles, valuable possessions, and any other assets that may need to be divided. Ensure you have proof of ownership and an accurate valuation of each asset (a divorce financial planner can help with this).
    3. Income and Employment Records: Gather pay stubs, W-2s, and other income-related paperwork to establish your and your spouse’s earnings. If you or your spouse own a business, include relevant financial statements for valuation purposes.
    4. Retirement and Pension Accounts: Obtain statements for retirement accounts, pension plans, and any other retirement savings you or your spouse may have. Understanding the value of these accounts is crucial for equitable distribution.
    5. Insurance Policies: Make sure you have documentation for health insurance, life insurance, property insurance, and any other policies that require attention during the divorce process.
    6. Debts and Liabilities: Collect records of credit card statements, loan agreements, and any other outstanding debts to gain a comprehensive understanding of your financial obligations.

     

    The Benefits of Being Organized:

    Having all the necessary documentation organized and readily accessible provides several advantages. It allows your attorney and divorce financial planner to have a clear picture of your financial situation, enabling them to provide you with the best possible guidance and representation. Being organized also reduces the chances of overlooking critical financial aspects that could impact the outcome of your divorce settlement.

    Seek Professional Guidance:

    Navigating divorce is a complex process, and it’s essential to seek professional guidance to ensure you are well-prepared and protected. Working with a divorce financial planner and an experienced family law attorney can provide you with valuable insights, help you understand the implications of different financial choices, and advocate for your best interests.

    In conclusion, gathering documentation is a critical step in the divorce process that empowers you to make informed decisions and achieve a fair and equitable settlement. Take the time to collect all the necessary paperwork, and work with a knowledgeable team of professionals who can guide you through this challenging time with expertise and compassion. Remember, being well-prepared lays the groundwork for an empowered divorce journey.

    Divorce Documentation Checklist

    By: Elina Cannon, CDFA®, CFA®

     

     

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    Article: Strategies to Navigate Divorce when your Spouse has Narcissistic Traits

    Divorce is a difficult and emotionally charged process on its own, but when your spouse exhibits narcissistic traits, it can become even more challenging. Dealing with a narcissistic partner during divorce can be emotionally draining, manipulative, and overwhelming.

    Before we delve into strategies to navigate this journey, let’s first understand what narcissism means. A narcissist is someone who has an inflated sense of self-importance and an intense need for admiration and attention. They often lack empathy for others, have a sense of entitlement, and believe they are superior to those around them. In relationships, they may display manipulative behaviors, constantly seek validation, and struggle to accept responsibility for their actions.

    Now, armed with this understanding, let’s explore empowering strategies to help you navigate divorce when your spouse has narcissistic traits:

    1. Set Boundaries and Focus on Self-Care: Dealing with a narcissistic spouse may involve encountering manipulative behavior and attempts to undermine your emotions. Setting firm boundaries is essential for protecting your mental and emotional well-being. Limit communication to necessary topics and maintain a focus on self-care. Surround yourself with a supportive network of friends, family, or a therapist who can offer validation and understanding.
    2. Learn the BIFF response method for effective communication: The BIFF response method (developed by the High Conflict Institute), is an acronym that stands for Brief, Informative, Friendly, and Firm. It is a powerful communication strategy to respond to difficult or manipulative messages effectively. When divorcing a narcissistic spouse, using the BIFF method can prevent unnecessary conflicts, emotional distress, and maintain focus on the important matters at hand.
    3. Focus on the Long-Term Goals: While it may be tempting to get caught up in emotional battles with a narcissistic spouse, try to remain focused on your long-term goals. Identify what is truly important to you, whether it’s custody arrangements, financial security, or a peaceful post-divorce life. Use your goals as a guide when making decisions during the divorce process.
    4. Seek Support from a Therapist or Divorce Coach: Working with a therapist or divorce coach can provide you with a safe space to process your emotions and develop coping strategies. They can help you navigate the emotional challenges of divorcing a narcissistic spouse and provide guidance on setting boundaries and managing your feelings.
    5. Hire your Divorce Power Team: In divorces involving a narcissistic spouse, the complexities may be amplified. It’s crucial to work with an experienced divorce financial planner and family law attorney who understands the dynamics of narcissism and can advocate for your best interests. Your power team can empower you with critical information, help protect your rights, navigate negotiations, and shield you from unnecessary emotional turmoil.

    In conclusion, divorcing a spouse with narcissistic traits can be an arduous journey, but it is essential to prioritize your well-being and the well-being of your children. Utilizing these strategies can empower you to navigate the process with strength and resilience. Remember, seeking professional guidance and support can be instrumental in helping you overcome the challenges and emerge from the divorce process with a brighter future ahead.

    By: Elina Cannon, CDFA®, CFA®

     

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    3 Steps to Jumpstart Your Divorce

    Hello, and welcome to the first episode of “Empowered Divorce Decisions” where we will share information and resources to help you feel empowered to make critical decisions in your divorce, and move forward to your next chapter with confidence.In today’s first episode, we will be discussing 3 steps to jumpstart your divorce process. My name is Elina Cannon. I am a Divorce & Investment Strategist at Argent Bridge Advisors. Joining me today is Eric Ashburn, who is a partner and private wealth advisor at Argent Bridge Advisors.

    Our financial planning firm is a multi-family office headquartered in Northern Virginia that serves individuals and families throughout the U.S. We specialize in critical family moments, including divorce. Eric and I are both Certified Divorce Financial Analysts.

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    [Market Recap] Cup of Joe: October Market Update

    Equity markets finished the 3rd quarter on a two month skid. Rising oil prices and interest rates were the main culprits for this.

    Looking back, this feels like a market that got out over its skis up through July and spent the last two months back pedaling to more reasonable expectations. The stock market is focused on how long interest rates may remain high and when the tightening effects of that will start to alleviate. Things like mortgage rates declining and what the squeeze on corporate profits.

    What do market statistics mean to you?

    • Timely perspective and why it should matter to you:
      Today’s S&P 500 level takes us back to 5/3/2021.  The trailing return for the 2.33 years since then is flat, excluding dividends.And in fact, the index is still down approximately 11% from its peak in January of 2022.  Still not back to where we were pre-pandemic and pre-rate hikes. When you hear these sound bits on TV you should think, “Does this apply to me?”
    • Index concentration: The top 5 names of the S&P 500 amount to a whopping 24% of the index; the top 10 names account for 31%!.  At one point this year, the top 7 stocks were responsible for around 80% of the Index’s return.
    • Unless you owned only those 5-10 stocks, then you’re not going to experience this. Unless you owned only the index, you won’t experience this.  And never would we recommend you focus your portfolio in 10 stocks or even one single index fund.
    • Last time interest rates were this high was in July 2007.  This is a market environment most people are not used to.
      Why is that important? Because the Fed’s actions have an enormous impact on how markets behave and, thus, your portfolio.  The Fed began raising interest rates last year and volatility was rampant.  But before this, a rate hiking cycle of this scale was so long ago that it seems people forgot what this feels like.
    • Many economists are referring to today’s levels as “back to normal interest rates”. Hopefully this means that the Fed can make adjustments without causing massive price dislocations, which is what happens when rates sit at such an extreme (0%!) for such a long spell. The Fed has said they intend to keep rates higher for an extended period of time, so investors should reset their expectations and think of this as the proverbial New Normal, at least for a while.
    • What a recession may mean for your portfolios.
      Volatility experienced in a recessionary market is typically good for actively managed strategies. It allows for what’s referred to as price discovery- where the market price of a stock is lower than what is implied by the fundamentals of the underlying company.  Active managers love to pounce on these opportunities.
    • Typically, asset allocation has a more pronounced impact during and out of a recession.  For example, small & mid cap US stocks tend to do very well and often outpace large caps, coming off the bottom of economic cycles.  Growth, particularly Tech, stocks should have less of an oversized effect. Bonds historically have acted as a stabilize. Hopefully we see this as the Fed nears the end of the hiking cycle.  In the mean time, savings rates are providing a nice return to weather the storm, per se.
    • Focus on your spending- Maintaining your normal spending plan, when funded by distributions from your investments, eats up bigger chunks of your assets when the markets decline.  So adjusting your spending is a great way to improve your investing outcome.Thank you for your continued trust and partnership. 


      Joe Gallemore, CIMA®, Partner

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    [Market Recap] Cup of Joe: September Market Update

    Stock Markets cooled off in August

    The August decline seems to be not such a bad thing. Not a good thing, per se, but good in the sense that it may be healthy for the market.  Staving off the proverbial irrational exuberance and keeping expectations in check.

    • The S&P 500 was +20.6% through July 31st.  On pace for a calendar year return of +35.4%. That has happened only 5 times since the Great Depression, and the last time was in 1958. So a year like this would be exceptional.

    In our opinion, one good thing about the market repricing in August is that it seemed to happen on its own, it was not caused by any surprise headlines or negative reports.

    • The August cool-off also happened with a very average amount of volatility, average by historical standards.
    • Except for a three-day period right in the middle, the daily moves were mostly in bite sized chunks, which is nice to see.  This is also good for the investing mentality, because it keeps the financial media quiet which prevents either our Fear or FOMO reactions from flashing red.
    • A market moderating itself on its own isn’t always a bad thing because it keeps expectations in check and mitigates the amount of emotional frenzy we experience.

    What this August performance could also be signaling is that the Fed is still in the driver’s seat. Market participants were seemingly watching the data roll out and gauging the potential signaling of if-you-give-a-mouse-a-cookie will it end up with the Fed hiking rates more or pausing for a while.

    A big positive right now is:

    • Job market has remained strong and the Unemployment rate has remained low.
      Employed workers fuels spending which fuels corporate profits.
      Corporate profits are the main driver of long term stock prices.

    Thank you for your continued trust and partnership. 


    Joe Gallemore, CIMA®, Partner