It was another great quarter for stocks, both in the US and global markets. Large-cap US stocks continued their overall dominance of the investing landscape. Bonds were basically flat for the quarter.
Somewhat counterintuitively, the stock market seemed to make a new all-time high almost daily, even in the face of voluminous uncertainty in the economic, politics, and world affairs. But this is not an unusual circumstance. Many times throughout history, financial markets have climbed the proverbial “Wall of Worry” and overcome any number of supposed calamities to deliver satisfactory investment returns.
But long-term investors cannot expect everlasting clear skies ahead and it would be a grave error to use the past three months as a barometer for the future. Three months is a blink of an eye over a 30-50 year investing horizon. And markets are fickle things (they are made up of people after all). Financial storms will undoubtedly re-emerge at some point in the future. Unforeseen events, economic shocks, or even just “animal spirits” could catalyze a new bear market at any point.
None of this is to say that we shouldn’t enjoy the good times while they last. Times like these are, after all, the “fun” part of investing. But be sure to bookmark the feelings of optimism and tranquility that you currently feel. When the market is down 10%, 20%, or 50% it can help to remember the good times in order to help maintain a sense of poise and balance when the markets are ugly.
Economic update
As usual, it’s a mixed bag when it comes to the economy. Here are the main economic data highlights:
Economic growth has surprised to the upside – 3.2% for 4Q 2023.
Inflation in the US has cooled – 3.2% in February, but remains above the Fed’s 2% target and the Fed Board has lingering concerns about a potential rebound. Jerome Powell, the Fed Chairman, has expressed some hesitance to reduce the Fed Funds rate – currently at 5.3% – until later in the year.
The Fed’s balance sheet continues to shrink… going from $9T to $7.5T since 2022.
US Government spending and debt remain an ongoing, long-term issue. Corporate bond spreads (a measure of implied default risk) remain very low, which is good to see in the face of higher interest rates.
Loans backed by commercial real estate continue to linger as an issue for certain investors and regional banks.
The job market has cooled ever so slightly. Earnings growth and retail sales remain stable.
Commodity prices remain broadly stable. Notable exceptions include gold, which continues to make new all-time highs and cocoa, which is in the midst of a severe supply shock – sorry chocolate lovers.
Other updates
Switch to T+1 setlement window… There is a big update coming to the “plumbing” of the financial markets. Currently, trades of stocks and exchange traded funds (ETFs) take two business days to settle (T+2). But in late May, the settlement window will shrink to one business day (T+1). Practically speaking, this will only effect clients wishing to access cash from their investment accounts. For example, if you sell $10,000 of IBM or VTI on a Monday, you typically can’t get your cash out until Wednesday. Under the new rules, you’ll only need to wait until Tuesday to get cash. This will bring stock/ETF trades in line with the current rules for mutual funds. In an ideal world, trades would settle instantaneously, but alas, we haven’t gotten there just yet.
Real estate commissions… There appear to be big changes coming to real estate commission rates. The National Association of Realtors has proposed a revamp of their system for co-operative compensation between buyer/seller agents. I’m not a big fan of high real estate commissions, so I’m cautiously optimistic this could lead to lower pricing for consumers. But we’ll have to wait and see how the markets react going forward.
Matthew Jenkins is the Founder of Noble Hill Planning LLC. Matthew has over 15 years of experience working in both large and small financial services firms. Before starting his career in finance, Matthew served as a U.S. Army Ranger. Matthew values transparency and fair dealing and enjoys helping people prepare for a great retirement.
Market Commentary 1Q 2024
It was another great quarter for stocks, both in the US and global markets. Large-cap US stocks continued their overall dominance of the investing landscape. Bonds were basically flat for the quarter.
Somewhat counterintuitively, the stock market seemed to make a new all-time high almost daily, even in the face of voluminous uncertainty in the economic, politics, and world affairs. But this is not an unusual circumstance. Many times throughout history, financial markets have climbed the proverbial “Wall of Worry” and overcome any number of supposed calamities to deliver satisfactory investment returns.
But long-term investors cannot expect everlasting clear skies ahead and it would be a grave error to use the past three months as a barometer for the future. Three months is a blink of an eye over a 30-50 year investing horizon. And markets are fickle things (they are made up of people after all). Financial storms will undoubtedly re-emerge at some point in the future. Unforeseen events, economic shocks, or even just “animal spirits” could catalyze a new bear market at any point.
None of this is to say that we shouldn’t enjoy the good times while they last. Times like these are, after all, the “fun” part of investing. But be sure to bookmark the feelings of optimism and tranquility that you currently feel. When the market is down 10%, 20%, or 50% it can help to remember the good times in order to help maintain a sense of poise and balance when the markets are ugly.
Economic update
As usual, it’s a mixed bag when it comes to the economy. Here are the main economic data highlights:
Other updates
Switch to T+1 setlement window… There is a big update coming to the “plumbing” of the financial markets. Currently, trades of stocks and exchange traded funds (ETFs) take two business days to settle (T+2). But in late May, the settlement window will shrink to one business day (T+1). Practically speaking, this will only effect clients wishing to access cash from their investment accounts. For example, if you sell $10,000 of IBM or VTI on a Monday, you typically can’t get your cash out until Wednesday. Under the new rules, you’ll only need to wait until Tuesday to get cash. This will bring stock/ETF trades in line with the current rules for mutual funds. In an ideal world, trades would settle instantaneously, but alas, we haven’t gotten there just yet.
Real estate commissions… There appear to be big changes coming to real estate commission rates. The National Association of Realtors has proposed a revamp of their system for co-operative compensation between buyer/seller agents. I’m not a big fan of high real estate commissions, so I’m cautiously optimistic this could lead to lower pricing for consumers. But we’ll have to wait and see how the markets react going forward.
Beware Municipal Bonds
Read More »Matthew P. Jenkins, CFA, CFP®
Matthew Jenkins is the Founder of Noble Hill Planning LLC. Matthew has over 15 years of experience working in both large and small financial services firms. Before starting his career in finance, Matthew served as a U.S. Army Ranger. Matthew values transparency and fair dealing and enjoys helping people prepare for a great retirement.
Matthew is a CFA® Charterholder and CERTIFIED FINANCIAL PLANNER™ Professional. He is also a member of the National Association of Personal Financial Advisors (NAPFA) and the Fee Only Network.