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Weekly Wealth of Knowledge - Week of 2/12/24

February 14, 2024

The Weekly Wealth of Knowledge is your download of this week's most important topics related to our community, financial planning, the markets and more!  As we enter into February, we will focus on "generational planning." All month long we will be providing you a host of content about transferring wealth to other members of your family and the appropriate strategies and benefits of doing so.

In this issue:

  • MONECO Insights - Empowering The Next Generation (3 min read)
  • Solid Start To 2024 (3 min read)
  • CPI Data Produces Sigh Of Relief (3 min read)

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Empowering The Next Generation

In the context of ensuring generational wealth, the significance of financial education cannot be overstated. As we navigate through an era of increasing financial complexities, ensuring that the next generation is equipped with the necessary knowledge and skills to make informed decisions about money is paramount. One powerful way to instill these values is through holding family conversations centered around financial literacy. As always, if we can help in any way, do not hesitate to reach out! 

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Solid Start To 2024

Stocks are off to a solid start in 2024. January gains are particularly enjoyable because of the old adage from the Stock Trader’s Almanac, “As goes January, so goes the year.” Nearly 75 years of historical data shows that when the S&P 500 has risen in January, the average gain for the remainder of the year has been about 12%. This January, the S&P 500 was up 1.6%. 

Stocks have also historically fared well after the broad index has reached a new all-time high, as the S&P 500 did last month for the first time in over two years. The average 12-month gain after a new high, with more than a 12-month wait between those highs, has been nearly 12%, with gains 13 out of 14 times.

Those new highs have prompted some to wonder if stock valuations are too rich. They’re elevated, no doubt, but they still look reasonable considering today’s interest rates. Interest rates and price-to-earnings ratios tend to move in opposite directions when rates are elevated. Big tech companies, like Alphabet, Meta, and Microsoft, are another justification for high valuations. Their impressive earnings power is the reason why earnings growth is poised to accelerate and should help prevent valuations from getting too stretched.

A soft landing for the U.S. economy, though not assured, may also help push stocks higher despite full valuations — assuming inflation continues to ease. The job market remained surprisingly strong in January, adding over 350,000 jobs as wages rose. Although that could possibly contribute to a delay in Federal Reserve (Fed) rate cuts until summertime, markets may have adjusted to fewer cuts already. Good news may be good news.

We see a lot of merit in the bull case, but the bears have plenty to support their case as stocks attempt to continue to climb the proverbial “wall of worry” and build on year-to-date gains. Presidential elections bring uncertainty, which may add some volatility even though stocks usually rise during election years. Commercial real estate continues to plague some regional banks.

A treacherous geopolitical climate cannot be dismissed, particularly a potentially wider conflict in the Middle East. Shipping goods around the world is taking longer and costing more. Military aggression by China toward Taiwan cannot be ruled out, nor can some spillover from China’s soft economy.

In reviewing the full picture of what to expect from markets this year, a resilient U.S. economy, easing inflation pressure, and growing earnings create a favorable backdrop for both stocks and bonds. But with high valuations and mounting geopolitical risks, modest positive returns appear most likely. If you have any questions, do not hesitate to reach out.

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 CPI Data Produces Sigh Of Relief 

The US Bureau of Labor Statistics announced its revised Consumer Price Index data last week, again showing that inflation came down in the second half of 2023, a key data point that is closely watched by the Federal Reserve. Although down, inflation is still far from the target of 2%. With talk of interest rate cuts in 2024, the outlier is how many and the ultimate timing. If you have questions, your team is here for you. 

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Important Information

This material is for general information only and is not intended to provide specific advice or recommendations for any individual. There is no assurance that the views or strategies discussed are suitable for all investors or will yield positive outcomes. Investing involves risks including possible loss of principal. Any economic forecasts set forth may not develop as predicted and are subject to change.

Moneco Advisors, LLC and LPL Financial are not affiliated with any other referenced entity.

This commentary reflects the personal opinions, viewpoints and analyses of the MONECO Advisors employees providing such comments, and should not be regarded as a description of advisory services by MONECO Advisors or performance returns of any MONECO Advisors client. The views reflected in the commentary are subject to change at any time without notice. Nothing in this commentary constitutes investment advice, performance data or any recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. Any mention of a particular security and related performance data is not a recommendation to buy or sell that security. MONECO Advisors manages its clients’ accounts using a variety of investment techniques and strategies, which are not necessarily discussed in the commentary. Investments in securities involve the risk of loss. Past performance is no guarantee of future results. 

References to markets, asset classes, and sectors are generally regarding the corresponding market index. Indexes are unmanaged statistical composites and cannot be invested into directly. Index performance is not indicative of the performance of any investment and do not reflect fees, expenses, or sales charges. All performance referenced is historical and is no guarantee of future results.

All data is provided as of February 6, 2024.

Any company names noted herein are for educational purposes only and not an indication of trading intent or a solicitation of their products or services. LPL Financial doesn’t provide research on individual equities.

All index data from FactSet.

The Standard & Poor’s 500 Index (S&P500) is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.

This Research material was prepared by LPL Financial, LLC. All information is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy.

Bonds are subject to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rates rise and bonds are subject to availability and change in price.

There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.

Past performance does not guarantee future results.

Asset allocation does not ensure a profit or protect against a loss.