Weekly Client Letter

Historically, the stock market tends to perform well after interest rate cuts, which is why many investors are optimistic, and we’ve seen positive reactions recently. However, there have been exceptions, such as in 2001 and 2007, when the results didn’t match expectations. This highlights the importance of maintaining a balanced approach and managing risk carefully. […]

The concentration of the S&P 500 in a few major stocks has significantly increased and continues to pose a risk for markets. For instance, Nvidia by itself now carries more influence in the index than some entire sectors. This makes the market more vulnerable to the performance of just one company. At Redwood, we proactively

Investors often describe cash/money market assets as ‘dry powder’ – resources on the sidelines ready to boost the equity market. However, while the notional dollars in cash are higher than before, it doesn’t have as much power over the stock market. As a percentage of the S&P 500 market cap, the amount of cash is

Over the past year, we’ve seen a shift in how the market reacts to economic news. Earlier, negative economic data like lower consumer spending or rising unemployment was seen as positive for stocks because it signaled that inflation might be cooling, leading the Federal Reserve to potentially cut interest rates. This was good for the

With over 3,500 equity mutual funds and ETFs available, it may seem easy to build a diversified portfolio. But is that really the case? When you consider how many of these funds hold major companies like Microsoft, Apple, and Nvidia, you’ll discover over half of them do, leading to significant concentration risk. Even with different

The next few weeks will be important for markets to see if the Nasdaq 100 falls below its 200-Day Moving Average (DMA), like it did in 2022, which could mean more potential downside. The 200 DMA is a key indicator that shows the index’s average closing price over the last 200 days, helping us understand

The recent sharp downturn in the market can raise concerns and questions. It’s important to remember that returns can fluctuate rapidly in the short term. What goes up can also come down quickly – this is a natural part of market dynamics. However, long-term buy-and-hold strategies without diversification are not always the best approach. For

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