MARKETS IN JANUARY
Asset classes were mixed in January. US large cap and Intl stocks were slightly positive, while mid and small cap stocks gave back some gains from Q4. Bonds held steady close to even with an income yield still above 4%.
Economy seemingly on good footing
Economic output is strong. GDP exceeded expectations for both Q4 and 2023.
Employment is staying strong as well. Jobs Data far exceeding Wall St expectations. Economy has added over 750,000 jobs in the last two months.
What the Fed is watching is close to the range they want. Fed’s preferred inflation measure is starting to stabilize near a level they’ve been targeting.
Let’s greet this positive data with cautious optimism. There are still many cross-currents moving beneath the surface of the stock indexes that signal a slowdown is still very much a possibility.
Managers of the strategies we use like to focus on quality companies that manage debt well, have competitive advantages in their business models, and have resilient streams of cash flow. So in an environment where interest rates are higher and consumer spending may slow down, owning businesses with very strong fundamentals is a great position from which to start.
What do we focus on now?
Putting cash to work
MMKT funds are very short-term vehicles and are among the first things to lower payouts rates when the Fed eventually cuts interest rates.
The Fed doesn’t even need to cut rates for the payout to decrease. The expectation of rate cuts starts to get baked into the prices in the short term bond market and will start weighing on the yield of your savings accounts.
Rebalancing your investment accounts
We’ve been rebalancing the assets we over see for you.
If you got more conservative in your 401K, 403B, or Thrift Savings account, don’t forget about it and let it sit there. Make sure to rebalance it back to your long-term target allocation.
Still expect volatility. And along with that, expect some of the unexpected.
Now is the time to be disciplined investors, and be comfortable with some uncertainty, while keeping your eyes on the growth to be had once things really improve.
Joe Gallemore, CIMA®, Partner
Director of Investment Management