Client Newsletter Q1 2024
Dear Friends,
Happy Spring! As we bid farewell to a notably mild winter up north, let’s take a moment to appreciate the remarkable performance of the market which has soared to all-time highs this year.
At the beginning of the year, investors expected the Fed to deliver several rate cuts. That got everyone excited, and the market rallied in January. Lower rates usually mean more borrowing and spending which is good for business. As economic data emerged, it was clear that the economy and job market proved to be in good shape despite fluctuations in inflation. This realization boosted market confidence and reaffirmed the underlying strength of our economy.
In the first quarter, three key factors shaped market sentiment:
Geopolitical Landscape: There have been no major disruptions to global trade and security from geopolitical events.
Oil Prices: Oil prices remained stable, bolstering confidence across sectors.
Corporate Profits: Corporate profits surged to record highs, with the last quarter of 2023 being the most profitable of the year. It’s worth noting that this surge coincided with a decline in the rate of inflation.
As of this writing, Iran’s attack on Israel has injected additional uncertainty into the market. While we’re keeping an eye on potential disruptions, especially in the energy sector, it’s reassuring that the United States has been pumping oil at record levels and remains the world’s largest producer of crude oil. Should there be any shock to the energy sector, the USA is well-positioned to weather the storm.
Speaking of storms, so far, we’ve been fortunate enough to steer clear of any major disruptions. We will keep a close watch as circumstances can change. Corporate profits have surged to record highs and continue to grow. In fact, the fourth quarter of 2023 was the most profitable of the year, coinciding with a decline in inflation. The talking heads on TV preach about how inflation is coming down, making it sound like we’re in for a discount spree. Both you and I see this is not the case as we do our shopping around town. What they mean is prices aren’t going up as fast as they used to, which is good. We don’t want to see prices drop on a regular basis. Imagine if everyone thought prices would be coming down? No one would buy anything in anticipation of a better deal down the road. This scenario would slow down the economy and trigger a recession.
What lies ahead? It’s uncertain, but here’s our perspective: With the job market showing resilience and consumer spending remaining robust, we anticipate continued economic growth. Companies are stepping up with increased dividend payments and commitments to share buybacks, boosting shareholder yield. Unfortunately, that doesn’t mean there won’t be volatile periods within the growth. The tremendous upside movement this year could lead to some choppiness in the coming months. With the government’s efforts to keep the economy rolling ahead of elections this fall, we anticipate a strong finish in the third and fourth quarters.
As the transition to Schwab from TD Ameritrade is complete, you may have noticed changes in appearance and level of detail in your statements. We’ve been working closely with Schwab to update various components. Given Schwab’s scale, these changes will take time to implement, but rest assured, you should be able to view your year-to-date gains and losses by the end of this year. Additionally, we provide quarterly reports that are designed for simplicity and clarity.
As always, if you anticipate changes in your financial situation or have any questions, please don’t hesitate to reach out.
Warmly,
Investment Advisory services offered through Moonstone Asset Management, Inc. a registered investment adviser
Risk Disclosure: Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. Past performance does not guarantee future results.
This material is for information purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security. The content is developed from sources believed to be providing accurate information; no warranty, expressed or implied, is made regarding accuracy, adequacy, completeness, legality, reliability or usefulness of any information. Consult your financial professional before making any investment decision. For illustrative use only.