What To Expect When You’re Expecting

What To Expect When You’re Expecting

Twenty-eight years ago, my wife and I were expecting our first child who was born in July. Even though it’s been 28 years, it seems like yesterday. From the first moment we found out she was pregnant, the book entitled “What To Expect When You’re Expecting” was like a bible to Nancy. Every pain, every flinch meant nose into the book for an answer! 

Where am I going, you ask? Since early 2024, there has been a consensus opinion about the economy and the markets, along with so many questions about what to expect. The consensus among most “supposed” experts has been that the Federal Reserve would begin to lower rates and do so as many as four times in 2024. The reasoning was that inflation was slowing, the economy was showing signs of weakness, consumers were using all their savings and that we would see what is known as a “soft landing” recession. As for markets, most analysts believed as rates would come down, bonds would increase in value and the stock markets would seek out small gains. A contentious political environment with mud slinging would add to the uncertainty and cause volatility. Unfortunately, our economic version of the “What To Expect When You’re Expecting” hasn’t panned out and left those of us who manage investments wondering “what’s happening?”. The “book” didn’t predict that. Now only one rate cut is expected this year, rates have not fallen, bonds as measured by the AGG are negative for the year and the S & P 500 is having another great year. Despite a solid return for the S & P 500, a scratch below the surface shows disturbing facts that don’t lead to confidence in the overall market. According to Barrons, just five stocks of the 500 have accounted for 61% of the total return of approximately 12% this year. Another scary fact is that since the index is not evenly divided, it is based on the market value of the stocks in the index, now three companies, Nvidia, Microsoft and Apple make up 20% of the index. 

So why am I boring you with these facts? It’s simple. Well, should we throw away all best practices of investing; diversification and just keep buying three or five stocks to make money? Should we just toss away all our solid dividend producing stocks in addition to midcaps, small caps, and foreign companies because we are tired of lower returns and invest in higher risk like crypto currencies?  If you have been lucky enough to have made out-sized gains in stocks like Nvidia, do you take profits because the S & P and the Nasdaq are at all-time highs, or do you ride the crest? Are you worried that this this a remake of the late 90’s when huge tech gains lead to painful losses for the three years following the turn of the century? Should we be worried about the normally weak and volatile summer months, the Democratic and Republican National conferences, and the lead up to the election? Will the markets finally get nervous, and correct? Is it too late to invest into this coming uncertainty? Why isn’t there a book entitled “The Markets; What To Expect When You’re Expecting”?  I can tell you this; if there was a book, it wouldn’t be worth reading since there is no reliable way to predict the future of the economy and markets. The Federal Reserve, the market analysts, the talking heads on CNBC are consistently………wrong!  By the way, I ended up burning my wife’s book and still have two great kids to show for it. In my 33-year career, despite periods of extreme market greed followed by market downturns, sticking with a diversified portfolio generally was the best course. Meanwhile fear of the unexpected turned out ok because faith and optimism won. Try it. 

If you’re in one of our managed models, we have taken a small amount of profits, reduced our equity allocations a bit and stand waiting for an opportunity to profit from lower interest rates and lower stock prices especially when investors are willing to buy in areas other than just the small number of headline grabbers. While we are concerned about the anxiety that the heated political battle will cause, we are confident that Artificial Intelligence will lead to higher company earnings in many industries and that will lead to a truly healthy situation where a diversified portfolio will deliver solid returns without taking outsized risk. Oh, and yes we are staying diversified. 

Jay Gershman is the Owner and Founder of Retirement Visions LLC, a West Hartford-based financial planning firm that focuses on comprehensive life planning and financial management. For more information, visit www.allset2retire.com. Information and advice are for guidance only and opinions expressed belong solely to the author. Securities offered through Silver Oak Securities Inc. member FINRA/SIPC. Investment Advisory Services offered through Redhawk Wealth Advisors, Inc., an SEC Registered Investment Advisor. Silver Oak Securities, Inc., Redhawk Wealth Advisors, Inc. and Retirement Visions LLC are not affiliated.