Author: Minich MacGregor Wealth Management

Q2 Market Recap

Written by Minich MacGregor Wealth Management on July 19, 2024. Posted in Posts.

One of our favorite metaphors for investing is that it’s like packing a suitcase.

Let’s say you’re preparing for a summer trip to the beach. What would you put in your suitcase? A swimsuit, probably. Sandals. Sunscreen. Plenty of shorts and t-shirts. Sunglasses and a hat. Then, when you take a step back, you realize you still have space for a few more items. What do you choose? More beach gear? Makes sense – after all, it’s the middle of summer, and your destination is famous for being the perfect place to work on a tan.

Or would you pack a pair of pants and a long-sleeve shirt because you guess it might get cold at night? Would you tuck in an umbrella and fold up a poncho…just in case it rains?

In our experience, some investors are like the tourist who packs for one kind of weather and one type of activity. To illustrate what we mean, let’s recap how the markets performed last quarter.

When 2024 began, inflation was near its lowest point in two years. As a result, many investors figured prices would continue to drop, and the Federal Reserve would lower interest rates sooner rather than later. (And possibly even several times throughout the year.) In other words, they “banked” on warm weather and sunny skies, then packed their suitcase accordingly.

Well, there’s nothing more frustrating than when unexpected rain ruins fun in the sun. Instead of falling, inflation ticked up through Q1, rising from 3.1% in January to 3.5% in March.¹

As a result, when the second quarter began, the mood on Wall Street had shifted substantially. Suddenly, there was no more talk of the Fed cutting rates early and often. Instead, investors began to wonder if the Fed would cut rates at all in 2024. Some economists even speculated that the Fed might raise rates again. So, investors re-opened their suitcases. Out went the swimwear; in went the coats and gloves. It’s no surprise, then, that the S&P 500 dropped 4.2% in April.²

What these investors didn’t realize was that the sun was already starting to peek out from behind the clouds.

Fast-forward to the beginning of July. Looking back, we now know that inflation dropped to 3.4% in April, 3.3% in May, and a surprising 3% in June.¹

A big reason for this slide is due to gas prices, which fell by 3.6% in May and 3.8% in June.³ (Energy prices in general fell by 2% in both months.³) This helped negate the fact that food and housing prices – two of the most stubborn and volatile drivers of inflation actually went up slightly in June.

As you can imagine, the talk has turned once again…to whether the Fed will cut rates sometime in the summer. This renewed optimism, combined with another factor that we’ll get to, helped lift the markets out of the doldrums. For the quarter, the S&P 500 gained 3.9%, while the Nasdaq rose 8.3%.⁴

A 3% inflation rate means that consumer prices are up only 3% compared to this same time last year, not that prices have fallen lower. Inflation is the rate at which prices are increasing. A lower inflation rate means that prices are rising more slowly; deflation is when prices actually drop…and it’s usually the sign of an unhealthy economy.

So, what does this mean going forward? Is it time to repack the suitcase?

The answer is no – because we believe we packed it correctly the first time.

Any savvy traveler knows that when you pack a suitcase, you don’t just factor in what you think will happen. You pack for what could happen. If your goal is to hit the beach, you pack a swimsuit…but since you know it could rain, you also pack a poncho. Your plan is to feel sand between your toes, but if the beach is too crowded, you’ll go for a hike instead…which is why you pack shoes as well as sandals.

The way inflation has gone (up and down) and the way the markets have responded (ditto) shows exactly why investing isn’t about predicting what will happen. It’s about planning for what may happen. You pack a suitcase in a way that ensures your vacation will be fun no matter what. We base our investment strategy in a way that helps you keep working toward your goals, regardless of what short-term market conditions are like.

The fact of the matter is we don’t know whether the Fed will lower interest rates in Q3. Of course, it’s certainly possible that they will. Three straight months of declining consumer prices is certainly a good sign. Even better is that the economy has continued to be solid. (GDP grew by 1.4% in Q1.⁵ As of this writing, many economists are predicting a 2% rise in Q2.⁶) But it’s also possible that a rate cut is still many months away. Trying to guess what will happen in the short-term – and then making moves that could impact you in the long-term – is bad packing.

Then, too, inflation and interest rate expectations are not the only drivers of the markets. Tech stocks – specifically those companies most involved in the development or utilization of AI – helped the markets regain momentum in Q2. Any investor who decided to sit on the sidelines because of pessimism over inflation would have missed out on the optimism surrounding AI. Sure, it’s always a bummer to go to the beach and find it raining…but there are often plenty of other fun things to do on your vacation even when the sun isn’t out

When you think about it, the markets really are like going on a trip. There will always be reasons for enthusiasm and reasons for caution. Everyone who goes to Disneyland can look forward to amazing rides and horrendous crowds. The view from the Grand Canyon is spectacular; the weather can be abysmally hot. The flowers in England are spectacular; the rain can feel oppressive.

And for every factor that can pull the markets down, there will be factors that could push the markets up. Our job is to help you pack a suitcase – and implement an investment strategy with an eye on the long-term forecast – that keeps you prepared for all of it.

So, as we move further into a new quarter, that is just what our team will continue to do. We’ll be keeping an eye on many things this quarter. Inflation, the breadth of the market, the upcoming election – you get the idea. And whenever we feel there’s something on the horizon that could affect the items in your suitcase, we’ll let you know immediately.

In the meantime, if you ever have any questions or concerns, please let us know. And if you have any upcoming summer travel plans, well…be sure to send us pictures!

Have a great week!

¹ “Inflation falls 0.1% in June from prior month,” CNBC, https://www.cnbc.com/2024/07/11/cpi-inflation-report-june-2024.html
² “S&P 500 falls 4.2% in April,” S&P Global, https://www.spglobal.com/marketintelligence/en/news-insights/latest-news-headlines/s-p-500-falls-4-2-in-april-as-market-momentum-loses-steam-81466397
³ “Consumer Price Index Summary, U.S. Bureau of Labor Statistics, https://www.bls.gov/news.release/cpi.nr0.htm
⁴ “Stops dip as investors digest inflation data,” Reuters, https://www.reuters.com/markets/global-markets-wrapup-1-2024-06-28/
⁵ “Gross Domestic Product,” U.S. Bureau of Economic Analysis, https://www.bea.gov/data/gdp/gross-domestic-product
⁶ “GDPNow,” Federal Reserve Bank of Atlanta, accessed July 10, 2024. https://www.atlantafed.org/-/media/documents/cqer/researchcq/gdpnow/RealGDPTrackingSlides.pdf

Financial Planning Bucket List

Written by Minich MacGregor Wealth Management on July 15, 2024. Posted in Posts.

How is your summer going? We hope you’ve been able to find ways to beat the heat while still having fun in the sun!

Summertime is when many people, retired or not, focus on checking items off their personal bucket list. Visiting that country you always wanted to visit. Hiking that trail that’s been calling your name for years. Mastering the art of gardening, competing in a local BBQ contest, getting to a 15 handicap in golf. The goals that bring you the most satisfaction. The milestones by which you measure personal progress. The activities that add true richness to your life.

Recently, though, several new clients have come to us with a similar frustration: They don’t feel like they have the resources — or the time — to actually do what’s on their bucket list. They don’t feel like they’re on track to reaching their goals.

This is a very common feeling for people of all ages and walks of life. Often, those who feel this way fall into one of three groups.

The first group is those who feel like they must wait for retirement to do almost anything on their bucket list. They are so busy hustling, so busy trying to work, save, and invest for the future, they often wonder if the future will ever come. They wonder if their most cherished dreams will have to be put off until an age when they are less physically able to enjoy them.

The second group is those who have very specific retirement goals – but retirement always seems to be moving further away even as they get older. They wonder when and whether they’ll actually be able to retire. They wonder if retirement is just an illusion.

The final group is those who are retired…but have found that, so far, retirement isn’t everything they thought it would be. Maybe their expenses in retirement are higher than they anticipated. Maybe they feel wary and unsure of spending any more money than they absolutely have to, because they’re afraid of outliving their savings. Either way, they are not spending their golden years traveling the world, cycling on that new electric bike they’ve always wanted, or even learning new skills.

As financial advisors, let us say it unequivocally: No matter what your goals are or what group you fall in, nobody should have to feel this way.

Fortunately, you don’t have to. There are always methods for ensuring you remain on track to your dreams. Savings and investment strategies for both short-term and long-term goals. Having a good financial plan, when you come right down to it, is about finding ways to achieve the items on your bucket list….and leaving no stone unturned in your efforts to do so. Before and after retirement.

You use, when it comes to your bucket list, there is something we fervently believe:

“If you can dream it, we can help you do it.”

For instance:

Create a beautiful garden. Start a new career. Ski for 100 days a season. Volunteer in the inner-city neighborhood where you grew up. Finally, finally use all your frequent flyer miles. Create a world that consists of nothing but a hammock, a pitcher of lemonade, and a stack of John Grisham novels. Raise horses, goats, or chickens. Participate in guided tours of all the ancient wonders of the world. Open your own bed and breakfast. Trek to the Himalayas. Visit every national park. Learn to scuba dive. Visit every major-league ballpark. Relax. Go on a Safari in Africa. Move to a college town and take all the classes you skipped 40 years ago. Write movie reviews for the local weekly. Climb a mountain. Rent a barge for a canal tour in Europe. Invest in startup companies. Coach youth soccer, baseball, and basketball. Drive from Alaska to Patagonia. Run the Boston marathon. Play as many of Golf Digest^®’s top-100 courses as possible. Play in a garage band. Play bridge for money. Just play! Go on at least three cruises a year. Act in community theater. Learn to play the piano. Read Russian novels. Run for local political office. Absolutely nothing. Give back to all of those who helped you. Do all the things you’ve been afraid of—skydiving, bungee jumping, and hang gliding. RV along Route 66 with your spouse and your dogs.

You get the idea. The point is that your bucket list shouldn’t just be an idle dream. It should be active pastime.

So, as we move into the second half of the year, ask yourself:

Am I doing any of the items on my personal bucket list this summer?

Do I feel like I’m on track to reaching my goals?

If the answer to either of these is “No,” or if you feel like you fall into any of the three groups we mentioned, here’s what we propose: Let’s chat. We can look at your goals, and what you’re currently doing to achieve them. We’d be happy to give a second opinion on how to make your bucket list part of your present instead of letting it languish in the distant future.

Financial planning is about more than just throwing money at the stock market. It’s about living the life you want to live. It’s about dreaming a dream…and then finding ways to actually do it.

Please let us know if we can ever provide more assistance in helping you achieve the items on your personal bucket list. In the meantime, we hope you have a great rest of your summer!