In the ensuing month and a half, a notable shift has occurred, as interest rates have steadily declined. Late October saw the 10-year treasury reach approximately 5%, only to recede to 3.9% at the time of this writing. This shift sparked a resurgence across various asset classes. The Dow Jones Industrial Average, S&P 500, and Nasdaq 100—all key benchmarks—have reached all-time highs. Particularly noteworthy is the recovery of asset classes that had lagged in the preceding two years. Since the late October peak in rates, small-cap stocks have surged by over 20%, mid-cap stocks by 19%, long-term bonds by 17%, and intermediate-term bonds by almost 10%.
It's crucial to acknowledge that these market movements represent short-term performance, and as with market downturns, expectations are steering returns. The prevailing expectation is that with inflation dissipating, longer-term interest rates receding, and wage growth slowing, the Fed will begin to cut rates starting next year. History as our teacher, it’s impossible to predict interest rate movements, so only time will unravel the true trajectory.
Maintaining Focus on the Long Run
In both favorable and challenging market conditions, it is imperative to stay focused on long-term returns. While the current short-term uptick provides a sense of reassurance, it is essential to remain aware of potential shifts. Looking ahead, we are cautiously optimistic about investment returns, particularly with interest rates now in the 4-5% range, as opposed to when they were near 0 and only had one way to go.
From a positioning perspective, we have been overweight risk assets, with a lean towards small and mid-cap stocks and intermediate duration municipal bonds. At some point in the not too distant future we will be adjusting back to a neutral weighting which will be reflective of the risk/return posture at that point. But, for now, we enjoy the run and the positive returns.
Looking back, it has indeed been an eventful year albeit with a positive ending. Look for our 2024 ranting and prognostication coming out soon. Enjoy the Holiday season with friends and loved ones and don’t hesitate to reach out with anything you may need.
Thanks
Frank Vance
Retirement Capital Advisors
800 Battery Ave SE
The Battery, Suite 100
Atlanta, GA 30339
Office- 412-722-3795
frank@retire-me.com
Securities and Advisory Services offered through Commonwealth Financial Network®, member FINRA/ SIPC, a Registered Investment Adviser. Fixed insurance products and services are separate from and not offered through Commonwealth Financial Network
Disclaimer: The term markets, market, S&P 500, or any other reference to financial markets are notional concepts and not specific investment advice or suggestion. This article does not constitute specific investment advice, and none is implied or inferred. This article is for clients of Retirement Capital Advisors only. Investing entails risk of loss of principal and no guarantee of returns are inferred or implied. Please consult your personal financial advisor if you have any questions.