Preparing for Success: Back to School and Beyond

As we bid farewell to the lazy days of summer, we warmly welcome the hustle and bustle of a new school year. Whether your child is embarking on their first day of kindergarten or gearing up for their final year of high school, this season marks a time of excitement and opportunity.

Back to school isn’t just about buying new backpacks and sharpening pencils; it’s also a poignant reminder of the importance of preparing for your child’s educational journey, both academically and financially. No matter what stage your child is in, it’s never too early to start planning and saving for their future educational endeavors.

If you need help exploring strategies for your child’s education, we’d be happy to help. Together, let’s empower our children with the tools they need to succeed in school and beyond.

Jeff Wetta, RPS and Dustin Jackson, CFP® RICP®
Managing Partners

Your Market Update

Market strength enters a bumpier month

We’re now halfway through summer and as the heat picks up, so has market volatility. The increased volatility was driven by worries about technology stock valuations and a rotation into value-oriented stocks. Through July 26th the S&P 500 was down 0.26% and the tech-heavy Nasdaq was down 2.5%. Meanwhile, the slower growing companies of the Dow Jones Industrial Average were up 3.8%. Year to date as of July 26th, the S&P 500 was up 15.4%, the Nasdaq was up 16.1%, and the Dow Jones Industrial Average was up 8.8%.

Company earnings season is also well under way for second quarter, and at this point the reporting is mixed. The outlook has not changed, though, and we still expect an 11% earnings growth rate for 2024, much of this to be led by technology companies. Nasdaq’s 3.6% fall on July 24th is evidence of this and the result of less than expected earnings and guidance by two tech giants, Alphabet (Google) and Tesla. However, the markets did rebound on the following Friday after a favorable PCE inflation report.

The PCE price index report showed an increase of 0.1% month-over-month, which was in line with expectations, while the June CPI report that was released on July 11th reported an increase in headline CPI of 3.0% year-over-year (3.3% excluding food and energy). This, combined with comments by the former New York Federal Reserve Bank president, helped fuel rate cut hopes, and we’ve started to see a “rotation” into value-oriented and small- and mid-cap stocks as a result. By some measures the gap in valuations between mega-cap stocks and small-cap stocks is the highest since the late 1990s. Certainly, some rotation was due. Whether this will be ongoing or not is still to be determined and depends, in part, on how the next batch of growth-oriented stocks report their earnings and guidance.

The prospect of a lower interest rate environment helped the Bloomberg U.S. Aggregate Bond index (the AGG), which was up 1.2% for the month through July 26th. This is the third positive month in a row for the index and brings its year-to-date return up to 0.76%.

Overall, markets remain broadly positive for the year despite volatility picking up over the past month.

Major news, so far muted market impact

Recently we’ve seen significant news relating to the upcoming presidential election. From the attempted assassination of former president and presidential candidate Donald Trump to President Biden’s announcement that he will not be seeking re-election, the news feed has been swamped with political updates. However, the effect on the stock market has been muted to this point. For now, markets appear laser focused on earnings, residual inflation, and potential rate cuts. We feel the election will become more notable to the market over the next few weeks and plan on publishing an upcoming piece focusing on this, so keep an eye out for more updates.

Looking Ahead

Our portfolios remain allocated to a broad mix of investment securities anchored by the S&P 500 in our equity holdings, with a smaller portion allocated to select growth investments. In addition, our equities are augmented with structured growth notes and attractively-yielding dividend stocks that have a high confidence of dividend payouts. Dividend stocks have recently benefited by the shift to value equities and may continue to perform well if this rotation continues.

We are also currently invested in both the highly-vetted private equity manager, Carlyle, and in our in-house Venture Growth Fund to add some alternatives to our equity allocation. As mentioned in prior reports, the environment and valuations for pre-IPOs have improved notably throughout the year.

For fixed income investors, we continue to take advantage of historically high short-term rates, augmented with yield notes. The yield notes allow us to take advantage of moments of volatility, such as during July’s tech correction, to help drive a higher yield. Additionally, our private credit allocation to Apollo allows us to take advantage of the “higher-for-longer” interest rate scenario and expected returns should still be attractive in a somewhat lower rate environment. An allocation to mid-duration fixed income, corporate bonds, and municipal bonds rounds out our fixed income portfolio.

To Sum Up

Our outlook for 2024 remains positive; the market volatility in July has not derailed our view. Going forward, we foresee that the economy will continue to grow slowly and steadily, with pockets of weakness that are the result of the Fed’s engineered effort to fight inflation. The second quarter GDP report issued on July 25th showing Q2 2024 growth of 2.8% reinforced this view.

There may be interest rate cuts in September, and we are analyzing whether the rotation to value stocks and smaller-cap stocks will continue. We also expect more volatility as the year continues. As mentioned in prior notes, issues on the horizon include: this quarter’s earnings season, Fed rates and inflation, the budget deficit, the price of energy, and the upcoming presidential election. We continue to focus on these issues, monitor company earnings and analyze multiple macro indicators as we make our way through the second half of 2024.

Sevasti Balafas, CFA, CPWA®
CEO & Founder
GoalVest Advisory

Sources: JP Morgan Asset Management, Bureau of Economic Analysis, Bureau of Labor Statistics, Morningstar, Factset, and Ycharts

Following the Financial Herd?

Are you following the herd when it comes to your finances? In behavioral finance, herd mentality bias refers to investors’ tendency to follow and copy what other investors are doing. It’s a hard bias to overcome for many reasons:

• FOMO: It’s hard not to jump on the “hot” stock everyone’s buzzing about.
• Safety in Numbers: It feels safer to do what everyone else is doing, especially in shaky times.
• Social Proof: We look to others to figure out the right move.

Participating in herd mentality could have some potential negative consequences for your portfolio. Here are three to be aware of:

• Buying High, Selling Low: Chasing the crowd often leads to buying when prices are high and selling when they’re low.
• Increased Volatility: When everyone buys or sells at once, prices swing wildly.
• Missing Long-Term Goals: Short-term moves can throw off your long-term plans.

When it comes to your investments, it’s important to not do anything rashly. Focus on your long-term goals, not necessarily what everyone else is doing.