Weekly Client Letter

The Federal Reserve’s dual mandate is to promote maximum employment and stable prices (control inflation). They pursue these goals through changes in the Fed Funds Rate. In 2022, they began raising rates to combat inflation, which has been decreasing back toward their target of 2%. While the Fed is cautious to avoid cutting rates too […]

Recent market volatility has been largely influenced by the Federal Reserve and expectations around interest rate cuts. Notably, the performance of large-cap stocks compared to small-cap stocks has been tied to these rate expectations. Earlier this quarter, higher inflation led to fewer anticipated rate cuts, favoring large caps as small caps struggled with rising rates.

The S&P 500 is often used to assess portfolio performance. What might be less familiar is how this Index is calculated- it’s based on market cap, meaning larger companies like Apple, Microsoft, and Nvidia have a greater influence on the index’s movements. Recently, the size of these giants compared to smaller companies in the Index

Buying and holding can lead to significant emotional & investment pain for investors. Market downturns can be a prolonged and painful experience, further intensified when considering inflation. Historically, there have been significant periods known as “lost decades” like 1929, 1968, or 1999 where $1,000 would have shrunk to less than $400 throughout the decade. And

Inflation has come off its peak, but recent readings of the Consumer Price Index remain stubbornly high. The Federal Reserve’s current dilemma: keep inflation under control while supporting economic growth. As seen in the grey line, historical patterns warn that cutting interest rates too soon can lead to a resurgence in inflation. The Fed must

Historical patterns show that peaks in household equity exposure have preceded long periods of muted market performance. These stretches of stagnant returns can be seen in the chart below highlighted in rectangles, right after the circles indicating the new high level of household equity exposure. While we can’t predict the future, recognizing these trends can

It can be tempting to invest in the recent best-performing investments being heralded by media. Unfortunately, research demonstrates, that investing in recent top-performing assets leads to less-than-expected outcomes. See the chart below, which illustrates sticking with a disciplined plan has historically outperformed chasing the most recent best-performing investments. Shifting Allocations = Poor Results We believe

Wall Street often advises staying invested, warning that missing the market’s 10 Best Days can significantly reduce your returns. As a tactical risk manager, we would argue, “Yes, but missing the 10 Worst Days increases your returns to 15.70%!” Achieving that may be unrealistic but consider missing BOTH the 10 Worst AND the 10 Best

Despite recent good earnings reports, the S&P 500 has declined below its 50-Day Moving Average level, signaling technical weakness in the market. This divergence between earnings performance and market trends can create opportunities, but also risks. The market may be signaling broader economic concerns or shifts in investor confidence. As always, we are prepared to

The Bloomberg U.S. Aggregate Bond Index, known for its stability and consistency, has seen an unusual uptick in volatility. Before 2020, the Index only had three negative calendar years since its inception. Recently the frequency of negative returns has increased significantly. In fact, the Index is on track to notch its third negative year in