Thank you for following our newsletter! Please be sure you are signed up to receive notifications any time we post by visiting this page (you will see a box at the top to sign up). As always, please don’t hesitate to reach out if you would like to discuss anything in this post!
Market Update & Investment Commentary
Data as of 06/30/2024 (unless stated otherwise)
US Markets
US Large Cap Equities have continued on from the highs reported in our last update after a brief drawdown in April. We are still seeing most of the performance in US Equities coming from the 7 largest stocks (AAPL, AMZN, GOOG/GOOGL, META, MSFT, NVDA and TSLA), which make up about 33.3% of the S&P 500’s weight but have contributed about 61% of its return. NVIDIA (NVDA) has posted a staggering 149.5% return so far this year! While we want to participate in the upside of these positions, we also don’t want too large of an allocation during an inevitable downturn. Accordingly, active management and other diversification strategies help us meet this goal.
The market seems to be shrugging off most of the uncertainty coming out of the news, particularly around interest rates, geopolitical issues, and the upcoming election. Below are the total returns for each major US asset class through 6/30/2024:
| S&P 500 | Russell 1000 Growth | Russell 1000 Value | S&P 400 (Mid Cap) | S&P 600 (Small Cap) | Bloomberg US Aggregate Bond |
Year-to-Date | 15.3% | 20.7% | 6.6% | 6.17% | (0.7%) | (0.7%) |
1-Year | 26.7% | 35.7% | 15% | 15.7% | 10.6% | 2.1% |
International Markets
On the international front, developed markets (as measured by the MSCI EAFE) have returned about 5.8%, and emerging markets (measured by the MSCI EM index) have returned 7.7% - both year-to-date in USD terms. We find international valuations are much lower than the US with a price/earnings ratio of 13.5x on the MSCI All Country World Ex-US Index vs. 21x for the S&P 500. Dividend yields are also higher abroad, with a current yield of 3.2% on the ACWI ex-US vs. 1.4% on the S&P 500. A strong dollar is still presenting a headwind to US investors’ returns on their international holdings. For example, Japanese equities (MSCI Japan) have returned 21.5% year-to-date in local currency terms, but when converted back to USD, the return becomes 6.5%! We’ve included a chart below showing the year-to-date appreciation of the US dollar vs. four major currencies.
Inflation
Headline CPI Inflation (year-over-year) is still relatively steady at 3.3% as of the May 2024 reading. Below we’ve included one of our favorite charts from J.P. Morgan’s “Guide to the Markets” which shows the overall inflation reading, but also the components of inflation. We can see from this chart that “Shelter” and “Auto Insurance” remain among the most persistent contributors to overall inflation. These operate with a lag due in part to leases and insurance policies only being renewed annually (on average). Expectations of rate cuts from the Federal Reserve this year have diminished, though we could see that change if inflation makes an unexpected decline or of there is deterioration in the labor market. Rates are currently being held at a range of 5.25% - 5.5%.
Labor Market
On the labor market, we saw Nonfarm Payroll gains of 206,000 in June. The unemployment rate ticked up to 4.1% from 4.0%, which is still low by historical standards and has not given any indication of making a big jump. For reference, we created a chart below that shows the unemployment rate over the last 5 years, which reached a high of 14.7% during the pandemic, as well as historical monthly nonfarm payroll gains, which reached a low of (20.5M) during the pandemic.
Summary
Disciplined investors are still seeing solid gains in their portfolios, and the economy is charging ahead. Although there is no shortage of uncertainty in the news, we pride ourselves on building strong portfolios that work for our clients in both good and bad markets. We don’t believe efforts to time the market by making predictions around interest rates (or anything else) will prevail in the long run, and we encourage everyone to invest with a long-term mindset. We are prepared to respond to changes in the markets by consistently monitoring our portfolios and taking advantage of rebalancing and tax-loss harvesting, as well as being proactive around cash management. We’ve worked with each of our clients to develop and maintain a strategic plan and remain available to discuss any questions or concerns!
Important Disclosure Information:
Please remember that past performance is no guarantee of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Columbus Wealth Management, [“CWM”]), or any non-investment related content, made reference to directly or indirectly in this commentary will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this commentary serves as the receipt of, or as a substitute for, personalized investment advice from CWM. CWM is neither a law firm, nor a certified public accounting firm, and no portion of the commentary content should be construed as legal or accounting advice. A copy of our current written disclosure Brochure discussing our advisory services and fees continues to remain available upon request or at www.cbuswm.com. Please Remember: If you are a CWM client, please contact CWM, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services, or if you would like to impose, add, or to modify any reasonable restrictions to our advisory services. Unless, and until, you notify us, in writing, to the contrary, we shall continue to provide services as we do currently. Please also remember to advise us if you have not been receiving account statements (at least quarterly) from the account custodian.
Historical performance results for investment indices, benchmarks, and/or categories have been provided for general informational/comparison purposes only, and generally do not reflect the deduction of transaction and/or custodial charges, the deduction of an investment management fee, nor the impact of taxes, the incurrence of which would have the effect of decreasing historical performance results. It should not be assumed that your CWM account holdings correspond directly to any comparative indices or categories. Please Also Note: (1) performance results do not reflect the impact of taxes; (2) comparative benchmarks/indices may be more or less volatile than your CWM accounts; and, (3) a description of each comparative benchmark/index is available upon request.
Comments