Broker Check

May Newsletter 2024

 

 

May 1, 2024

 

“…Politics…

Election years can often be a brain teaser for investors with concerns running high about how the market will be impacted. Election season historically has a short-term effect impacting the volatility of the stock market. Intelligent Investment Management continues to believe that exercising our long-term strategic portfolio strategy to achieve stated client goals generates the best results. Buying when stocks are on sale and selling when they are running up in value; this is a core component of achieving positive results over time. 

The ballot box is a decision concerning the overall direction of our country, not a decision that  influences the stock market for the long run. Investors left on their own can make mistakes with regard to adjustments to their investment portfolio if they act on emotions and become consumed with the political process and the nightly news. Those that do watch the nightly news have reason to be concerned about what they hear mostly due to the polarized political climate that we live in today.  However, history is on your side, because our proven investment strategy and track record has created growth and income in client portfolios.  Warren Buffett has been quoted as saying, “In the short run, the market is a voting machine but in the long run, it is a weighing machine.”  Meaning short-term influence will succumb to long-term results based on fundamentals.


Over the long haul it is the time in the market, not timing the market that matters.  We will not put your money at risk by anticipating election results as you could miss future growth opportunity once the dust settles from an election. Instead, we will continue to invest based on the fundamentals that impact the markets over the long run. The chart below provided by Capital Group (one of the world’s largest investment management companies) demonstrates that presidential election results have not historically correlated to an advantage or disadvantage in the stock market.


 

Historical data suggests that economics and inflation trends, more so than election outcomes, have a stronger correlation with market returns.

We function as your Fiduciary.  We broadly diversify across four distinct asset categories to achieve our client’s investment objectives and financial planning goals; we act in your best interest.  We have a Goals based approach and customize each client’s managed portfolio accordingly.  Our extraordinary long-term success dating back to 1997 has weathered many ups and downs that go far beyond any political climate.

The chart below shows our results for the Total Aggregate Portfolio we have managed for all clients since 1997.  This includes all accounts and all client investment objectives over that time period. 

Total Aggregate Managed Portfolio

      January 1, 1997, through April 30, 2024

       Note:  Graph is net of management fees.

                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                

According to Forbes magazine eighty-three percent of the last twenty-four election years saw positive US equity market growth which outpaced non-election years which saw positive results sixty-nine percent of the time. Our focus is not as much on the elections and the anxieties they create, but on the fundamentals of what actually drives market results and right now that is interest rates, corporate earnings, and economic growth. The latest GDP projections continue to remain positive; employment continues to remain strong. Going forward we expect AI technology innovations and money available for infrastructure projects to continue to support reasons to believe that economic growth will continue. 

2024 began with market analysts saying we would see five interest rate cuts this year. Now some market analysts are starting to question whether we will see any this year. Just today Fed Chairman Powell acknowledged inflation has not declined to their intended target of two percent and he announced they are going to continue to hold rates steady.  In this continued message from the Fed of “higher for longer”, our Cd/Bond ladder has held steady in value providing a yield of 4.2 percent.  Also, our Alternative Income category is up 5.2 percent on the year as of April 30. We expect to see the timeline for interest rate cuts continue to be pushed back, possibly until the end of the year or even into 2025.

The market value of individual stocks declined in April based on projections of the increasing future cost of business operations and wage growth continues to impact profitability. Any time we see market declines for an extended period we encourage clients to consider a Roth conversion. Talk to your CPA to see if this strategy makes sense given your individual tax situation.  Work with them to evaluate what amount of conversion would not push you into a higher tax bracket.   Please call our office with questions or to get additional guidance on pursuing a Roth conversion now.

The election season can amplify concerns and fears individuals have; however, our proven track record is something you can rely upon.  We will continue to evaluate Monetary and Fiscal policies to determine what it means for your portfolio.  Longer term, we are concerned over increasing debt levels, potential changes in tax policies, and the Fed’s ability to rein in inflation. Call us if you have questions regarding your portfolio. We will work through concerns with you and adjust your portfolio accordingly to meet your goals.  Please be sure to exercise your right to vote this fall based on your individual views. That is what the democratic process is all about! 

In March we sent out a letter that required your signature, it is required by regulation that we have these completed and filed in our office.  The letter included an acknowledgement of the transition to Schwab, the current investment management fee schedule, and a record of a trusted contact.  We have received this from most clients, however if you have not completed yours, please do so soon so we can ensure we remain in compliance with industry guidelines.

Summer is just around the corner.  We hope you are enjoying this time of year, whether it is a graduation, a wedding or just being outside.  Be safe and enjoy the beautiful summer weather. 

 

Sincerely,

Intelligent investment Management, LLP