by David Young, President

The first quarter of 2024 has been marked by dynamic market conditions, with US stocks enjoying a fifth month of gains and a record-setting rally that broadened beyond only the most significant tech stocks. This rally included more sectors, particularly value areas like energy and financials. 

March capped a fantastic first quarter, with the S&P 500 up 10.4%, marking its best start to the year since 2019. A solid stock first quarter is historically positive for the rest of the year.

Fourth-quarter GDP was revised upwards, S&P 500 earnings in the last quarter of 2023 grew more than double the expected pace, and consumers continue to spend. The Conference Board’s Leading Economic Index (LEI), which tracks ten economic indicators designed to predict the economy’s future health, turned positive in February after a 23-month negative streak.

Portfolio Performance

Our portfolios have demonstrated resilience and delivered solid returns this quarter.

  • Managed Income, our conservative portfolio, performed well, posting a gain of 1.49% versus -0.8% for the Barclays Bond Index. Because interest rates have stabilized and been moving down, it has been a difficult environment for bonds over the past several months. In this environment, we were pleased that Managed Income generated a positive quarterly
  • Top Flight, our growth-oriented portfolio, outperformed the S&P 500, gaining 12.16% in the first quarter of 2024 compared to the index’s 10.56% return. From its inception on January 1, 1998, through March 31, 2024, Top Flight has returned 1565% versus 708% for the S&P 500.

More importantly, the question is how much risk Top Flight took to generate its returns. Investors often ignore risk-adjusted returns, but that is, in reality, the most important question they should ask.

The Ulcer Index measures how much downside volatility an index takes to achieve its returns. During that same 25-year time period, Top Flight’s Ulcer Index was 10.82 versus 15.88 for the S&P 500. Lower is better. We remain committed to active management and strategic allocation to capitalize on opportunities and mitigate downside risk.

When reviewing these and any other returns, please review the disclosures on page 7 of this newsletter for additional details.

Outlook for the Remainder of the Year

The presidential election and the potential for decreasing interest rates are also impacting the markets. Geopolitical tensions, such as those in Ukraine, can introduce uncertainty into the market, leading to fluctuations in asset prices. The Federal Reserve’s monetary policy decisions regarding interest rates play a crucial role in shaping market sentiment and investor behavior. Changes in interest rates can influence borrowing costs, inflation expectations, and overall economic activity, impacting various market sectors.

Despite these challenges, investor sentiment remains cautiously optimistic. A solid start to the year for stocks and positive economic indicators have instilled confidence in the market’s resilience. However, it’s essential to remain vigilant and prepared for potential volatility as geopolitical events unfold and interest rate decisions are made. By staying informed and maintaining a diversified portfolio, investors can navigate market fluctuations and capitalize on opportunities for long-term growth.

The US economy is strong, with fourth-quarter GDP revisions indicating robust growth. S&P 500 earnings in the last quarter of 2023 exceeded expectations, reflecting healthy corporate performance. Consumer spending remains a driving force behind economic expansion, contributing to overall financial stability. The positive trajectory of leading economic indicators suggests continued growth momentum in the coming months, providing a favorable backdrop for market participants.

Retirement Income Planning

Often, our focus is primarily on your investments. If you do not do an excellent job with your investments, then the other areas of retirement planning don’t matter because there is nothing to decide about. Step One is to have an excellent investment strategy.

Retirement planning is also essential, and it involves several key components:

  • Investment Strategy: As I mentioned, this is where we define how we will allocate your assets across different investment vehicles such as stocks, bonds, limited partnerships, real estate, etc. Your investment strategy should align with your long-term financial goals, risk tolerance, and time horizon until retirement.
  • Cash Flow Management: Understanding your current income and expenses is essential for retirement planning. To determine when you can retire, we want to run forecasts of your future income needs based on different growth assumptions. This cash flow analysis should run from your projected retirement date through your life expectancy. These financial projections will help determine if your money will last as long as you do and help us identify when to make any adjustments.
  • Risk Tolerance: Assessing your risk tolerance helps determine your portfolio’s appropriate mix of investments. Getting your risk tolerance right and adjusting it over time is one of the most important things you should have us do.
  • Estate Planning: Estate planning involves creating a plan for how your assets will be managed and distributed after your death. We do not do estate planning ourselves, but we are familiar with what needs to be done and can refer you to an estate attorney who can help you.
  • Taxes: Understanding the tax implications and taking proactive action, when possible, can help maximize your returns from your retirement accounts.

In addition to these areas, it’s essential to regularly review and adjust your retirement plan as your financial situation and goals evolve. Working with our advisors can provide valuable guidance and expertise in navigating these complex aspects of retirement income planning.

Book Update

Last quarter, I shared information about my book, “Hunting For True Wealth,” which has received positive feedback and support from our clients. I am grateful for your engagement with the book and the meaningful discussions it has sparked. “Hunting For True Wealth” combines my passion for investing with insights from my hunting adventures, offering valuable lessons on building financial wealth and achieving true fulfillment. I appreciate all of your positive feedback and support. Please go to Amazon and post a book review if you haven’t done so yet.

Closing Thoughts

As we navigate the complexities of the investment landscape, we are grateful for your continued support and friendship. Your trust and confidence in our firm inspire us to strive for excellence in everything we do. We are dedicated to serving your financial needs and providing the guidance and support necessary to achieve your investment goals.

With a focus on transparency and communication, we aim to empower you to make informed investment decisions. If you have any questions or concerns, please don’t hesitate to contact us. We are here to help you navigate these challenging times and make informed decisions about your financial future. Thank you for your continued friendship.