Markets in July

• We’re now at the halfway point of 2024, and the returns for asset classes are spread across the spectrum.
  • Large Cap US stocks are leading the way only because of a few of the largest names.
  • Emerging Markets saw a strong rally in Q2 and now sit in a distant second place.
  • Bonds also recovered a lot in June and are now close to the level of the year while producing substantial income.
    
•  A simple review of why we diversify.
  • Because it is impossible to consistently predict what is going to perform best. Different asset classes take turns leading performance. So, to capture pockets of strong performance, you have to spread your investments among them.
  • Because diversification works. An allocated portfolio is never the best or worst performing. But historically, it has achieved notable performance with less volatility than most equity asset classes.
  • Because it controls risk. Historically, bonds have been way less volatile than stocks. Some equity asset classes are more volatile than others… small caps vs large caps, for example. So, by including different amounts of each, we end up with a level of expected portfolio volatility that we are able to handle financially and emotionally.
•  In today’s market environment, it is very tough to tell what is going to rally and when or what is going to experience sharp declines. Being diversified is what keeps your portfolio durable through the many unexpected turns. Many years ago, a very smart economist called diversification “the only free lunch in town.” This analogy highlights the simplicity and effectiveness of this investing principle.
  

By: Joe Gallemore, CIMA®, CExP™

Partner & Director of Investment Management