MAY 2024
ENDURANCE IS KEY
My youngest son Jackson just completed the grueling trek of an Ironman competition in Houston, Texas. He endured and conquered 140 total miles of swimming, biking, and running in the time of 12 hours and 8 minutes. Just thinking about an endurance test like that makes me tired!
Jackson and his college brothers, however, wanted to achieve something special in their senior year of university. So, they plunged, literally, into months of training to prepare for a 2-mile swim, a 112 mile bike ride and a 26 mile marathon.
How in the world can you bike for six hours after swimming for over an hour? And then, have enough left in the tank to run a marathon. I’ll never know, because I will never compete in a triathlon.
Nevertheless, all of us have had to face or deal with one endurance test or another on this adventure we call “life.” Part of the endurance tests we face generally involve our finances in some manner or another. Fortunately, a comprehensive financial plan with a sound investment strategy can and should endure the seasons of uncertainty and withstand the surprises that unfold from time to time.
We have all been dealing with the uncertainties of the economy and the markets since the 2020 pandemic and the 2022 bear market. Historic inflation and a huge increase in interest rates has tested all of us. The economy appears to be resilient, but the Federal Reserve remains unsure as to when inflation will be licked, and they can begin reducing rates.
The stock market has delivered positive returns in the second year of the new bull market which began in October of 2022. Just like a triathlete, we will persevere through the highs and lows of the market to stay on course and keep executing the principles of your solid investment strategies.
We are especially pleased and proud of you, our clients, that have stayed true to the disciplines of our investment models, that have managed risk and provided performance in line, and often in excess, of their respective benchmarks the last five years. You have seen these numbers in your progress sessions, and the results affirm the importance of maintaining patience for long term strategies.
We are grateful for the excellent leadership of our branch’s Chief Investment Officer, Andrew Steinmetz, whose implementation work these last five years has been stellar. Our investment committee, which includes your Trinity Strategic Wealth financial advisor, meets every Monday to pore over data, charts, analysis work and ideas to monitor your investment strategy, and discuss opportunities. We are fortunate to have such a dedicated group who truly care about your success.
Thank you for the continued opportunity to serve you. You have proven yourself to have endurance for the long haul of the investment journey, and we will endeavor to match your patience with diligence and perseverance.
Enjoy your summer!
Sincerely,
Mike Mazzei, CFP®, MPAS®
MASTER PLANNER ADVANCED STUDIES®
CEO, Trinity Strategic Wealth™
mike.mazzei@raymondjames.com
(918) 858-2802
MARCH 2024
“HISTORY RHYMES”
Looking at the market today, we cannot help but see some similarities between the Nifty Fifty period of the 1960s and 1970s, the technology bubble of the 1990s, and the period leading up the Financial Crisis in 2008. The last 15 months can be characterized by massive gains in a small subset of stocks dubbed the Magnificent Seven (Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia, and Tesla). While these are all amazing companies, we believe it is right to be concerned about their valuations and the concentration we see in the stock market. In that sense, we are most reminded of the Nifty Fifty period, which was led by companies such as AT&T, Eastman Kodak, Exxon, General Motors, IBM, and Sears.
None of the aforementioned periods are exactly the same as today, but they do rhyme. All three of those periods led to a bear market and recession. All of the bear market cycles lasted at least one year, unlike the quick declines we saw in 1987 or 2020.
Also similar to those times is the economic backdrop. Last year real GDP increased 3.1%, much higher than the 2% long-term average. The strong growth was partially driven by government spending as the federal deficit ran at levels only seen during major recessions or wars. However, we are starting to see evidence of cracks under the surface. Retail sales are down three of the past four months, manufacturing production ex-autos (a highly volatile sector) has declined four months in a row, and housing starts fell nearly 15% in January. Despite some signs of a slowing economy, inflation numbers were higher than expected in January. The year-ago comparison for inflation has settled around 3% in recent months, still above the Federal Reserve’s 2% target. We believe inflation will make it back to 2%, but the economy likely needs to slow further to get there.
Based on that backdrop we have been fielding many questions about how to invest in this type of environment. Our answer is not exciting, but we feel it will be the right one – stay diversified. If history rhymes, other areas of the market could see stronger performance relative to the last few years. In this bucket, we consider areas like small and medium sized companies and value stocks. We have mentioned it previously, but we also believe that bonds look much more attractive with higher interest rates.
Bottom line, if today is similar to other periods in history, we would expect to see heightened volatility in markets in 2024. This is also an election year and we often see more market fluctuations in election years. We continue to diligently monitor potential risks and stand prepared to act on any opportunities that come from such fluctuations. The key will be to stay invested and remain diversified.
Thank you for your continued trust and allowing us to serve you.
Sincerely,
Andrew K. Steinmetz, CFA, MBA
Branch Chief Investment Officer
Trinity Strategic Wealth™