Strategic Shifts: Aligning Your Investment Strategy with Mid-Year Market Projections

The stock market is showing nice gains so far in 2024, with the S&P 500 up over 12% as of this writing. Other major averages, including the Dow Jones and the NASDAQ, have also shown strength so far in 2024. Several major averages are at or near all-time high levels.

After suggesting that we might see several 75 basis point rate cuts, the Fed recently indicated that we will only see one rate cut in 2024. The market’s initial reaction to this announcement was positive, but only time will tell how this plays out.

Second-Half Trends and Opportunities

The adage “sell in May and go away” will likely not be applicable to the rest of 2024 based on comments by several economists and market analysts.

This being an election year, investors may be concerned about the impact the outcome will have on the markets. However, it should be noted that the stock market has historically performed well in the second half of an election year under a first term president such as what we have with Joe Biden.

A number of market analysts are forecasting slowing, but moderate growth in GDP and other economic indicators. They point to the Fed’s cautious approach to cutting interest rates as a positive as well. Many are predicting an economic “soft landing” this year based on a combination of inflation returning to more normal levels and the economy managing to avoid a recession.

With the Fed delaying interest rate cuts and reducing the number of those cuts for the rest of 2024, this provides investors with an opportunity on the fixed income side of their portfolio allocation. With interest expected to remain at or near current high levels, this can be a good opportunity for investors to lock in these current high rates in their portfolios.

Opportunities exist in bonds, Treasuries, CDs and other fixed income vehicles. This can be a good time for investors to consider building a ladder of fixed income securities that fits their time horizon and cash needs.

Implications for Your Investment Strategy

For stock investors, the forecasts of continued upside, even if this upside is somewhat moderate, is good news. Investors will want to review their own portfolios to see if their equity holdings are performing in line with expectations given the stock market’s results so far in 2024.

As in any type of market environment, you will want to review your portfolio’s asset allocation and rebalance as needed. This is especially important given that gains in the stock have not been evenly distributed among the main asset classes that many investors use.

For example, large cap growth stocks have significantly outperformed large cap value stocks on average. As of mid-June the Vanguard Growth ETF had gained almost 19.5% for the year-to-date while the Vanguard Value ETF was up just under 7.9% for the year.1 While nobody can predict when large cap value stocks will make a move, they do seem undervalued and could offer solid future growth potential.

Regardless, long-term investors will want to revisit their asset allocation periodically to help ensure that it is in line with their financial goals, their time horizon for those goals and their risk tolerance. Generally, your target asset allocation should be based on your longer-term goals versus reacting to current stock market or economic trends. That said, understanding current market trends can be a useful tool in both rebalancing your portfolio and in determining which holdings to utilize within the asset classes in your allocation strategy.

The 2024 Wildcards

As you know, there is a presidential election coming up in November. While there are many statistics showing how markets have performed in past election years under a multitude of scenarios including which party wins, we truly will not know what impact the 2024 elections have on the markets and your investments until they happen.

Additionally, the Fed’s recent announcement of only one projected interest rate cut in 2024 is a change from what they were projecting going into 2024. If the Fed changes their policy again in 2024, this could have an impact on the markets.

So far, 2024 has been a good year for many investors. As always, you need to stay on top of your holdings and be ready to make adjustments as needed. That said, investors are wise not to overreact to every change in the markets or the economy, but rather to have a long-term investing focus.

Please feel free to reach out to your Wedbush financial advisor to discuss current market trends and their potential impact on your long-term financial goals.


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