Author Archives: vlm
![September Market Update Markets Pass Major Tests](https://victorywealthpartners.com/wp-content/uploads/2024/09/September-Market-Update-Markets-Pass-Major-Tests.jpg)
September Market Update: Markets Pass Major Tests
With fall upon us and students back in classrooms, it seems like a good time to reflect on the various tests that the U.S. economy and stock market have passed recently. When the economy and markets are tested, the foundation for future growth and capital appreciation gets stronger.
The Federal Reserve (Fed) engineered one of its most aggressive rate-tightening campaigns ever in 2022 and 2023, providing a tough test for the U.S. economy. Amid widespread calls for recession, the economy chugged right along, powered by consumers who continued to spend, even as rates rose. How did consumers do it? Stimulus helped, though we probably got more than we needed. So did low fixed-rate mortgages. Regardless of how it happened, and despite the Fed’s mixed track record, the economy passed this test.
The economy also seems to have passed its inflation test. The widely followed Consumer Price Index, which peaked at 9.1% year over year in June 2022, dipped below 3% last month. Same with the Fed’s preferred inflation measure (core personal consumption expenditures excluding food and energy). In response, the 10-year Treasury yield is down nearly a full percentage point since its April 2024 high, and mortgage rates are down even more. Call that a passing grade, though one could still argue for an incomplete.
The stock market also passed a tough test recently. On August 5, the combination of a weaker-than-expected jobs report for July and too much borrowing from some overly complacent traders (much of it in Japanese yen currency) caused a sharp market sell-off. Stocks have since bounced back on subsequent evidence that the economy continues to grow steadily. In fact, U.S. gross domestic product grew at an impressive 3% annualized rate in the second quarter. Despite that bout of volatility, major stock market benchmarks from both Russell and S&P produced modest positive returns in August. Gains weren’t just among the big tech companies, as performance has broadened out.
Perhaps the toughest tests for markets lie ahead. The upcoming election and related policy uncertainty could be a catalyst for a correction. A tougher geopolitical test could come from China, Russia, or Iran. Eventually, if the U.S. debt pile continues to grow, bond vigilantes will demand higher Treasury yields. Valuations are high despite even considering the double-digit earnings growth corporate America is generating. These are tough tests that may cause more volatility near-term, but markets and the economy have stellar long-term track records. Expect this bull market to continue to bring home excellent report cards. Please contact Victory if you have any questions. We are happy to help!
ASHLEY ROSSER, PRESIDENT
Prior to her career in the financial services industry, Ashley earned her Bachelor of Science in Nursing from Cedarville University.
Ashley decided to make a career change from her ten years within the healthcare industry as a pediatric emergency room nurse to retirement and 401K investment planning. She joined Victory Fiduciary Consulting in 2008 after obtaining her Series 65 professional financial license and went on to earn her AIF (Accredited Investment Fiduciary) professional designation from the Center for Fiduciary Studies.
![Markety Volitility Increases Going Into August](https://victorywealthpartners.com/wp-content/uploads/2024/07/Markety-Volitility-Increases-Going-Into-August.jpg)
Market Volatility Increases Going Into August
Temperatures are not the only thing rising as we head into the last days of summer. Investors have experienced heightened volatility over the past few weeks. The current landscape of the financial markets has been marked by increased volatility and a rise in outside trading days, creating a dynamic environment for investors. Outside trading days, characterized by substantial price movements beyond the typical range, have become more frequent.
One significant driver of this volatility is the ongoing economic uncertainty. Global markets are grappling with the effects of inflation, fluctuating interest rates, and geopolitical tensions. Central banks worldwide have taken divergent approaches to monetary policy, leading to unpredictable shifts in market sentiment. For instance, the Federal Reserve’s aggressive interest rate hikes aimed at curbing inflation have resulted in heightened market sensitivity to economic data releases, causing significant price swings.
The advent of advanced trading technologies has also contributed to increased market volatility. High-frequency trading (HFT) algorithms and automated trading systems can execute large volumes of trades in milliseconds, amplifying price movements. These systems often react to market signals more swiftly than human traders, creating rapid and sometimes exaggerated price fluctuations.
The introduction of retail investors, spurred by the accessibility of trading platforms and social media, has injected additional volatility into the markets. Retail investors, often driven by sentiment and momentum rather than fundamental analysis, can collectively move markets in significant ways. The GameStop saga of early 2021 is a prime example, where coordinated buying by retail investors led to extreme price movements, catching institutional investors off guard.
Earnings season often adds to market volatility. Companies releasing their quarterly results can lead to significant price movements, especially if the results deviate from analysts’ expectations. Positive earnings surprises can propel stock prices upward, while disappointing results can lead to sharp declines. The anticipation and reaction to these earnings reports contribute to the frequency of outside trading days.
Geopolitical developments also play a crucial role in market volatility. Events such as trade wars, political unrest, and conflicts can trigger sudden shifts in market sentiment. For instance, the ongoing conflict in Ukraine has caused significant fluctuations in energy prices, impacting global markets.
It is understandable that increased volatility may cause anxiety for investors. This is why it is important to have a strict set of investment rules in place. This can help you avoid making emotional based decisions during times of market turmoil. At Victory we employ a specific set of math-based rules that we abide by regardless of market fluctuations. We would be happy to help you integrate these rules into your own portfolio. If you are interested in having us review your portfolio, please give us a call. We are happy to help.
ASHLEY ROSSER, PRESIDENT
Prior to her career in the financial services industry, Ashley earned her Bachelor of Science in Nursing from Cedarville University.
Ashley decided to make a career change from her ten years within the healthcare industry as a pediatric emergency room nurse to retirement and 401K investment planning. She joined Victory Fiduciary Consulting in 2008 after obtaining her Series 65 professional financial license and went on to earn her AIF (Accredited Investment Fiduciary) professional designation from the Center for Fiduciary Studies.
![Impact of Election Season on the Markets](https://victorywealthpartners.com/wp-content/uploads/2024/06/Impact-of-Election-Season-on-the-Markets.jpg)
The Impact of Election Season on the Markets
In case you missed it, there is a presidential election happening this year. Many of our clients are wondering what this may mean for their investments. Historically, the stock market’s performance in election years has shown certain trends, shaped by political uncertainty, economic policies, and market sentiment.
Certainly, the market has a lot of things going in its favor. First, the U.S. economy (and global economy for that matter) will likely continue to grow. Second, rates are coming down as labor markets cool, renewing rate cut hopes. Third, earnings are growing at a solid pace and will likely continue to do so through 2024 and 2025. Pullbacks will come, but if you look back at what causes 10%-plus corrections, they can almost always be tied to deteriorating corporate profits, as experienced in 2008, 2015, 2020, and 2022.
However, Election years are typically marked by heightened volatility. Uncertainty about the potential outcome and the future direction of government policies can lead to increased market fluctuations. Markets strongly dislike uncertainty, thus leading to chaotic movements in the weeks and months preceding an election. A clear and decisive victory can lead to market rallies as uncertainty is resolved. Conversely, a contested election or a significant policy shift can result in market downturns as investors recalibrate their strategies to align with the new political landscape.
Markets tend to favor the incumbent party, especially if the economy is performing well. Historically, if the sitting president or their party is likely to win, the market shows more stability and positive performance. This can be attributed to the market’s preference for continuity and the known economic policies of the incumbent administration. Remember markets are mostly interested in knowing what’s coming. Speculation will be rampant surrounding post-election policy changes, which is understandable. Taxes will likely rise when the Trump tax cuts expire next year no matter who is elected. But with narrow majorities in Congress, 2025 relatively far and solid corporate fundamentals, I expect pullbacks could be relatively shallow.
Different sectors respond uniquely to the political climate. For instance, defense stocks may rally if the incumbent administration is perceived as strong on national security, while renewable energy stocks might benefit from a candidate with a green agenda. Health care, technology, and financial sectors also experience varying degrees of impact based on the anticipated regulatory and fiscal policies of the potential administration.
While short-term volatility is a hallmark of election years, long-term investors often benefit from maintaining a steady course. Historical data suggests that despite the ups and downs during election years, the overall trend of the stock market remains upward. Staying invested and not reacting impulsively to political events is usually the best strategy.
In conclusion, while election years bring a unique set of challenges and uncertainties to the stock market, they also present opportunities. By understanding historical trends and maintaining a long-term perspective, investors can navigate the election-year turbulence more effectively. The key is to stay informed, avoid knee-jerk reactions, and focus on the broader economic indicators that drive market performance beyond the political noise. One piece of advice is to make sure you are following your investment policies. Your allocations should fulfill specific roles in your portfolio. By having a set of investment rules, it helps to weed out the “noise” that can sometimes lead to emotional investment decision making. If you aren’t sure if your current portfolio is working as hard as it should for you, please give us a call. As always, we are happy to help. .
ASHLEY ROSSER, PRESIDENT
Prior to her career in the financial services industry, Ashley earned her Bachelor of Science in Nursing from Cedarville University.
Ashley decided to make a career change from her ten years within the healthcare industry as a pediatric emergency room nurse to retirement and 401K investment planning. She joined Victory Fiduciary Consulting in 2008 after obtaining her Series 65 professional financial license and went on to earn her AIF (Accredited Investment Fiduciary) professional designation from the Center for Fiduciary Studies.
![Will April Showers Bring May Flowers to the Markets](https://victorywealthpartners.com/wp-content/uploads/2024/05/Will-April-Showers-Bring-May-Flowers-to-the-Markets.jpg)
Will April Showers Bring May Flowers to the Markets?
After a strong first quarter for stocks, some April showers rained down as the S&P 500 fell about 4% last month. Hopefully those showers will bring some flowers in May, despite the widely cited stock market adage, “Sell in May and go away.” There is some merit to this old adage because the S&P 500’s best six-month returns have, on average, come from November through April, and its worst between May and October (recall bear markets often end in October). Still, historically the index has gained an average of 1.8% from May through October — hardly worth avoiding.
While stocks have delivered solid gains this year, the steady growth of the U.S. economy alongside rising corporate profits increase the chances of more gains ahead. Last week’s data on gross domestic product looked soft on the surface, as the U.S. economy grew just 1.6% in the first quarter. But inventories and trade masked strong underlying consumer and business demand. Consumer spending rose at a solid 2.5% pace, while capital investment rose 2.9%. Economists looking for a slowdown keep asking: are we there yet? The economy may slow later this year, but we’re not there yet.
So, what caused stocks to dip? Beyond some digestion of strong gains through March, stubborn inflation and higher interest rates were the main culprits. As the downtrend in inflation has stalled recently, expectations for the start of the Federal Reserve’s rate-cutting campaign have been pushed out. With the Fed’s preferred inflation measure stuck near 3%, markets now expect one, or possibly two rate cuts this year, down from near six at the start of the year. Expect inflation to ease later this year as demand likely slows, but patience will be required.
If you’re concerned about a bigger slide, the numbers during corporate earnings season — now more than half complete — may be reassuring. A solid 80% of S&P 500 companies have beaten earnings estimates so far this quarter, with more than 8% average upside relative to estimates. Results from the big technology companies have mostly exceeded high expectations. And perhaps the most important earnings measuring stick, estimates have moved higher and provide evidence of upbeat guidance from corporate management.
With the economy growing steadily and corporate profits rising, the near-term outlook for stocks still looks supportive. As always, there will be rainy days. Sticky inflation remains a thorn in the market’s side and geopolitics are a potential stumbling block. But for markets, expect more flowers than showers in May and potentially beyond.
As always, please reach out to me with questions. We are happy to help.
ASHLEY ROSSER, PRESIDENT
Prior to her career in the financial services industry, Ashley earned her Bachelor of Science in Nursing from Cedarville University.
Ashley decided to make a career change from her ten years within the healthcare industry as a pediatric emergency room nurse to retirement and 401K investment planning. She joined Victory Fiduciary Consulting in 2008 after obtaining her Series 65 professional financial license and went on to earn her AIF (Accredited Investment Fiduciary) professional designation from the Center for Fiduciary Studies.
![March 2024 Market Recap and April Outlook](https://victorywealthpartners.com/wp-content/uploads/2024/04/March-2024-Market-Recap-and-April-Outlook.jpg)
March 2024 Market Recap and April Outlook
It may only be April, but investors find themselves under the sweltering heat of inflationary pressures. Inflation has been simmering over the past months, and Wednesday’s numbers suggest that the heatwave might intensify. The implications of hot inflation numbers extend far beyond the aisles of grocery stores; they have the potential to sizzle the stock market, sending shockwaves through portfolios and reshaping investment strategies.
The first quarter of the year witnessed a surge in inflation, fueled by a variety of factors ranging from supply chain disruptions to fiscal policies aimed at reviving economies. Central banks around the world have been closely monitoring these developments, yet the hot inflation numbers have persisted, posing a significant challenge to policymakers and investors alike.
So, how might these soaring inflation figures impact the stock market in the second quarter?
Investors are likely to experience increased volatility as inflationary pressures continue to mount. The beginning of April has been an example of this. Historically, periods of high inflation have been associated with greater market turbulence, as uncertainty surrounding future purchasing power erodes investor confidence. Stocks, particularly those in sectors sensitive to inflation such as consumer discretionary and industrials, may experience heightened fluctuations in prices as investors recalibrate their expectations and assess the potential impact on company earnings.
Moreover, rising inflation can exert downward pressure on stock valuations. As inflation erodes the real value of future cash flows, investors may demand higher returns to compensate for the diminished purchasing power of their investments. This could lead to a repricing of equities, particularly those trading at elevated valuations. Risk reward comes into play and investors may be less likely to buy stocks at inflated prices. Companies with pricing power and the ability to pass on increased costs to consumers may fare better than those operating in more competitive markets.
Inflation can also influence the decisions of central banks, with implications for monetary policy and interest rates. The Federal Reserve may adopt a more hawkish stance, signaling potential rate hikes. Remember, the market has priced in perfection which includes multiple rate cuts this year. Higher interest rates can have a cooling effect on economic growth and corporate profitability, as borrowing costs rise and consumer spending declines.
Despite the challenges, inflationary pressures don’t have to cook investors this quarter. As heightened volatility becomes likely, it is important to concentrate on your long-term financial goals during periods of short-term fluctuations. As a reminder, pullbacks and corrections are normal market movements, and we are overdue for both. Diversification in your portfolio can also help to manage risk. A diversified portfolio can help cushion against losses in any single investment or market segment. Your investment process can also have a significant impact on your overall performance. We employ a process that helps us determine what areas in the market are strengthening as well as weakening. We choose our areas accordingly. This allows us to stack the odds in our favor. Engaging a fiduciary advisor can help you make non-biased investment decisions during times of unsettled markets.
In conclusion, the impact of hot inflation numbers looms large over the stock market as we navigate the second quarter of 2024. While inflationary pressures may induce greater volatility and pose challenges to equity valuations, investors can adapt their strategies amid the turmoil. By adopting a disciplined approach, staying focused on long-term goals, and implementing sound investment strategies, investors can navigate the ups and downs of the market and position themselves for long-term success. If you have any questions, please reach out. We are always happy to help! Happy Spring.
ASHLEY ROSSER, PRESIDENT
Prior to her career in the financial services industry, Ashley earned her Bachelor of Science in Nursing from Cedarville University.
Ashley decided to make a career change from her ten years within the healthcare industry as a pediatric emergency room nurse to retirement and 401K investment planning. She joined Victory Fiduciary Consulting in 2008 after obtaining her Series 65 professional financial license and went on to earn her AIF (Accredited Investment Fiduciary) professional designation from the Center for Fiduciary Studies.
![February 2024 Market Recap](https://victorywealthpartners.com/wp-content/uploads/2024/03/February-2024-Market-Recap.jpg)
February 2024 Market Recap
In recent times, the stock market has been on a relentless climb, setting new highs and defying expectations. However, as the euphoria continues, concerns about excessive optimism, overbought conditions, and an extension from long-term moving averages are emerging. With the bulk of S&P 500 earnings now reported, the focus shifts to how the markets will stabilize. Despite the recent record-setting performance, some experts suggest that a correction in the coming month wouldn’t be surprising given the current overheated state of the market.
Investors find themselves at a crucial juncture, balancing the excitement of potential gains with the looming uncertainty of a market correction. In such times, the role of a fiduciary financial advisor becomes paramount. Unlike traditional advisors, fiduciaries are bound by a legal and ethical duty to act in their clients’ best interests, placing their financial well-being above all else.
How a Fiduciary Financial Advisor Can Help:
1. Objective Assessment: Fiduciary financial advisors are trained to provide an objective assessment of the market conditions. They analyze data, market trends, and economic indicators to offer an unbiased view of the current situation, helping clients make informed decisions.
2. Risk Management: Recognizing the potential for a market correction, fiduciaries work closely with clients to evaluate their risk tolerance and adjust their portfolios accordingly. They may recommend diversification strategies and asset allocation adjustments to minimize the impact of market volatility.
3. Long-Term Planning: Fiduciaries emphasize long-term financial goals rather than short-term market fluctuations. By focusing on a client’s overall financial plan, including retirement, education funding, and estate planning, they help build a resilient portfolio that can weather market storms.
4. Education and Communication: A key role of fiduciary financial advisors is to educate clients about market dynamics and the potential risks involved. They communicate transparently, ensuring clients understand the rationale behind investment decisions and helping them stay focused on their financial objectives.
5. Adaptability and Monitoring: Markets are dynamic, and fiduciaries understand the importance of adaptability. They continuously monitor portfolios, adjusting as needed to align with changing market conditions and clients’ evolving financial goals.
While the current stock market situation may be characterized by optimism, overbought conditions, and a potential for correction, partnering with a fiduciary financial advisor provides a solid foundation for navigating these uncertainties. Through objective assessment, risk management, long-term planning, education, and adaptability, fiduciaries strive to guide investors toward financial success while safeguarding their interests in both bull and bear markets. In times of market turbulence, the value of a fiduciary becomes even more apparent, offering clients the confidence and support they need to weather the storms of financial markets. If you are wondering if your portfolio could benefit from meeting with a fiduciary, we would love to sit down with you. While market valuations will change, our commitment to our clients remains unwavering. Have a wonderful March and we will see you next month!!
ASHLEY ROSSER, PRESIDENT
Prior to her career in the financial services industry, Ashley earned her Bachelor of Science in Nursing from Cedarville University.
Ashley decided to make a career change from her ten years within the healthcare industry as a pediatric emergency room nurse to retirement and 401K investment planning. She joined Victory Fiduciary Consulting in 2008 after obtaining her Series 65 professional financial license and went on to earn her AIF (Accredited Investment Fiduciary) professional designation from the Center for Fiduciary Studies.
![January 2024 Market Recap](https://victorywealthpartners.com/wp-content/uploads/2024/02/January-2024-Market-Recap.jpg)
January 2024 Market Recap
As the first month of the year ends, the broad markets closed the last trading day of the month up just 1% year to date. Markets had been optimistic through the third week of January, even reaching all new S&P 500 highs. This achievement was ahead of most analysts predictions that we would see new highs by mid-year 2024. However, the excitement began to wane during the last week. Investors have been eyeing the Federal Reserve’s stance on interest rates and were concerned by Jerome Powell’s statements on January 31. Hopes of a March interest rate cut were dashed as Powell gave his statement regarding possible cuts. “Based on the meeting today, I would tell you that I don’t think it’s likely that the committee will reach a level of confidence by the time of the March meeting to identify March as the time to do that. But that’s to be seen,” Powell said. Markets responded accordingly by selling off, with the technology heavy index Nasdaq taking the biggest hit as it sold off over 2% for the day. The previous trading days had been marked by increased volatility as investors grew increasingly anxious about interest rates. Interest rates continue to be important because high rates affect corporate bottom lines, and bottom lines affect profits.
Unfortunately, we won’t get a reprieve in interest rates until inflation comes down to around 2%. The Federal Reserve is likely to take a more conservative stance regarding interest rate cuts after they got burned in late 2021 and 2022 when they thought high inflation would be transitory. They were surprised when it was higher and more persistent than expected. If inflation remains sticky, cutting interest rates too soon could undo much of the progress that we have made. Even better, if the Federal Reserve can achieve its ultimate goal of bringing down inflation without harming the economy (the elusive soft landing) this could even further bolster returns in 2024. So far the economy has remained resilient in the face of challenges. The job market remains strong, and our economic growth has kept us from recession so far.
In my opinion, the topics to watch will be interest rates and inflation for 2024. The sooner inflation decidedly falls, the sooner we will see interest rates begin to come down. The markets may continue to be tentative until they feel confident that interest rates will finally trend down later in the year. Until that happens, growth stocks may continue to experience heightened volatility. I am not saying to count them out, I am just saying we should pay close attention. We have investment rules for a reason. If we begin to see violations of our rules, we will respond accordingly. If you do not feel confident regarding your current portfolio rules, consider finding a fiduciary advisor who can help you establish an investment policy. If you have any questions, please give us a call. We are happy to help. Until next month we wish you a safe February.
ASHLEY ROSSER, PRESIDENT
Prior to her career in the financial services industry, Ashley earned her Bachelor of Science in Nursing from Cedarville University.
Ashley decided to make a career change from her ten years within the healthcare industry as a pediatric emergency room nurse to retirement and 401K investment planning. She joined Victory Fiduciary Consulting in 2008 after obtaining her Series 65 professional financial license and went on to earn her AIF (Accredited Investment Fiduciary) professional designation from the Center for Fiduciary Studies.
![2023 Market Recap and 2024 Predictions](https://victorywealthpartners.com/wp-content/uploads/2024/01/2023-Market-Recap-and-2024-Predictions.jpg)
2023 Market Recap and 2024 Predictions
2023 was a year of many challenges for investors. Aggressive interest rate hikes, fears of recession, regional banks collapsing, and increasingly sticky inflation required investors to stay on their toes. I wanted to recap where we have been, and where we may be headed for 2024.
In March, the market faced higher-than-expected inflation readings and rising rate hike expectations. This, coupled with the unexpected closing of two regional banks sparked widespread concern and the market quickly dropped about 9%. Stocks recovered quickly as investors became more comfortable with the banking sector risk being more localized than systemic. The soft-landing narrative also gained traction, and the S&P 500 performance was almost 17% by the end of June. At this time, technology was overbought, market leadership was particularly narrow, and valuations appeared full, given the economic backdrop. You may remember previous articles referencing the significant overconcentration in both the S&P and Nasdaq indexes as the “Big 7” continued to be the main driver of stock prices. If you did not have significant exposure to Apple, Amazon, Google, Meta, Tesla, Nividia, and Microsoft your portfolio returns were likely significantly muted as other areas of the market struggled to compete with them.
Markets finally took a breather as we entered the month of August and markets sold off for three consecutive months. As November came, we were in a double market correction as both the S&P 500 and Nasdaq were 10% off their previous highs. You may remember that this did not come as a surprise to us as I wrote in November “we were cautious of being overly optimistic in both August and September. In fact, most of our charts were flashing caution for weeks before the drawdown began. We were just waiting for the match to ignite the flame was silently being stoked for weeks.” Markets had gotten too hot too fast and needed to cool off to maintain the ability to eventually move higher.
Momentum arrived in November as evidenced by the 8.9% spike in the S&P 500, the largest monthly increase in 10 years. November broke a streak of three consecutive down months for the S&P 500 and did so in style. We were wondering if there would be any room for the Santa Claus Rally after such a large positive move but December’s performance showed no coal for investors this year as the S&P 500 moved up nearly 4%. The S&P500 finished the year performing just over 26%. The index continues to be extremely concentrated leaving investors wondering how much further it could run in 2024.
While I have no crystal ball, I think market performance is going to greatly depend on whether the Federal Reserve decides inflation has cooled to a point that allows for interest rates to decrease. Lower interest rates and the Federal Reserve finding a way to stick the “soft landing” would allow for additional room to run, even in areas that are considered overvalued. Also, when we look at the age of our current bull market that was born in late 2022, history tells us we may see solid investment performance. Looking back at ever bull market in their second year, the S&P500 has gained an average of 12.6% and has been positive every time. So, the storyline exists that we could see a strong 2024. As we like to say, history doesn’t always repeat, but it usually rhymes. If you have any questions about your current portfolio or investment strategy, please give us a call. We would be happy to help. Happy New Year!
ASHLEY ROSSER, PRESIDENT
Prior to her career in the financial services industry, Ashley earned her Bachelor of Science in Nursing from Cedarville University.
Ashley decided to make a career change from her ten years within the healthcare industry as a pediatric emergency room nurse to retirement and 401K investment planning. She joined Victory Fiduciary Consulting in 2008 after obtaining her Series 65 professional financial license and went on to earn her AIF (Accredited Investment Fiduciary) professional designation from the Center for Fiduciary Studies.
![December 2023 - It's the Most Wonderful Time for The Markets](https://victorywealthpartners.com/wp-content/uploads/2023/12/December-2023-Market-update.jpg)
December 2023 – It’s the Most Wonderful Time for The Markets
It’s the most wonderful time of the year…for the stock market? With all this potential recession talk that has lasted two years, you would expect a lump of coal to arrive in your Christmas stocking this year. But quite to the contrary, Santa Claus appears to have arrived early this year as evidenced by the 8.9% spike in the S&P 500 last month, the largest monthly increase in 10 years. November broke a streak of three consecutive down months for the S&P 500 and did so in style. After the banner month of November, investors are hoping to see returns remain merry and bright.
The month of December already tends to be bullish; in pre-election years, the S&P 500 has been positive more than 72% of the time since 1950 with an average return of 2.9%. Historically, the strongest returns are often loaded into the second half of the month, hence the “Santa Claus Rally”. From a longer-term and historical perspective, higher returns are even more likely when they follow strong performance like we saw in November. As portfolio managers begin to window dress their funds for the upcoming new year, we may see the continued effects of the Santa Claus rally from the last five trading days of December through the first two trading days of January.
There are several plausible reasons for the jolly market movements in November. The Federal Reserve confirming their intention of pausing interest rate hikes certainly helped to excite investors. Since the Fed started hiking rates, inflation has declined meaningfully to 2.5% which remains just above the Fed’s 2% target. The downward movement in rates means lower and more attractive borrowing costs for business loans, mortgages, auto loans, credit cards and other debt vehicles. In addition, the most recent GDP (Gross Domestic Product) figure for the 3rd quarter came out at a blistering 5.2% growth rate. The economy continues to thrive, fueled by a strong labor market.
Will Santa return at the end of December? We will have to wait and see. The signs are pointing to markets regaining new highs as early as January. Also, seasonal market trends are often difficult to break but they are never definitive. Santa certainly left investors on the naughty list in 2022 when the S&P500 was down -5.9% for the month of December and closed out the year at -19%. Bah humbug. Despite ongoing narrow leadership and increased concentration in the growth indexes, 2023 is shaping up to be a much better year than the previous. As always, the time to make sure your portfolio is allocated properly is when everything is looking jolly. If you were uncomfortable during the month of October, you may be allocated too aggressively and can use last month’s run up to move into more conservative strategies. Making decisions based on emotions often lead to investors getting “Scrooged”. Your investment procedures should always be followed, regardless of which way the market is moving. If you have questions about your current portfolio or investment strategy, we are always happy to help. From Ashley and the team at Victory we wish you and your family Merry Christmas and a happy and healthy New Year!
ASHLEY ROSSER, PRESIDENT
Prior to her career in the financial services industry, Ashley earned her Bachelor of Science in Nursing from Cedarville University.
Ashley decided to make a career change from her ten years within the healthcare industry as a pediatric emergency room nurse to retirement and 401K investment planning. She joined Victory Fiduciary Consulting in 2008 after obtaining her Series 65 professional financial license and went on to earn her AIF (Accredited Investment Fiduciary) professional designation from the Center for Fiduciary Studies.
![November 2023 Markets Have Investors Still Spooked](https://victorywealthpartners.com/wp-content/uploads/2023/11/November-2023-Markets-Have-Investors-Still-Spooked.jpg)
November 2023 Markets Have Investors Still Spooked!
Halloween might be over but the current stock market moves have some investors spooked. Last week, both the S&P 500 and the Nasdaq indexes moved into correction territory. In other words, we are starting off November in “double correction” territory. A double correction means both the S&P 500 and Nasdaq have fallen at least 10% from their most recent highs at the same time. From a psychological perspective, this can feel downright scary for investors. There is good news for investors, however. Did you know that if we look back for 50 years, the market has returned about 8% in the month following the correction? Corrections are painful to endure, but they often lead to a healthy recovery move upwards like a V. As I like to remind clients, the stock market can’t just move straight up. It’s more like a yo-yo being walked up a flight of stairs. The yo-yo is constantly moving up and down as it gradually makes its way up the stairs.
It’s also easy to forget how often corrections occur. We expect to see a decline of 10% about once every 8 months. They are a part of a normal functioning market; they just typically feel worse when we are amid one. There can often be signs of an overheated and overstretched market if you are paying attention. If you were reading my blogs and watching my videos over the summer, you will remember I was confident we were due for some type of cooldown after such a strong run up. If you haven’t had a chance, check out AUGUST and SEPTEMBER blogs. You will see why we were cautious of being overly optimistic in both August and September. In fact, most of our charts were flashing caution for weeks before the drawdown began. We were just waiting for the match to ignite the flame was silently being stoked for weeks.
As investors, should we just sit on our hands and hope that history will repeat itself this month? I always think corrections tell you a lot about whether your current portfolio is properly allocated. If you are feeling anxious every time you see your balance numbers fluctuate, you may be invested too aggressively. Also, if you have been sitting on the sideline waiting for “a better opportunity to buy”, this might be it. Portfolio managers will be rebalancing their funds soon in preparation of “window dressing” for the start of the new year. Next month we will be watching to see if the Santa rally is going to return at the end of the year. If you are not sure if your portfolio is working as best in your favor as possible, we would love to review it with you. Obviously, it’s impossible to know if we are going to have a strong November but while history never repeats itself, it often rhymes. Wishing you and yours a wonderful season of thanks this November.
ASHLEY ROSSER, PRESIDENT
Prior to her career in the financial services industry, Ashley earned her Bachelor of Science in Nursing from Cedarville University.
Ashley decided to make a career change from her ten years within the healthcare industry as a pediatric emergency room nurse to retirement and 401K investment planning. She joined Victory Fiduciary Consulting in 2008 after obtaining her Series 65 professional financial license and went on to earn her AIF (Accredited Investment Fiduciary) professional designation from the Center for Fiduciary Studies.