LIFE Newsletter April 2024
Navigating Life’s Journey
The goal of our LIFE Newsletter is to bring you a blend of wisdom, financial insight, and philanthropy. Our commitment to enriching lives goes beyond financial advice – we extend our support to meaningful causes, with each featured organization receiving contributions from Abound Financial.
In this edition, as always, you’ll find thoughtful reflections, in-depth investment insights, our ‘Faith in Action’ spotlight on a charity close to our values, and an economic update to keep you informed and prepared.
Together, let’s embrace the path to financial abundance and compassionate action.
Life Lessons
“Be sure you know the condition of your flocks, give careful attention to your herds; for riches do not endure forever, and a crown is not secure for all generations.”
Proverbs 27:23-24 (NIV)
Investment Updates
Per LPL Research’s Global Portfolio Strategy Report – For complete copy of the report, click here.
INVESTMENT TAKEAWAYS:
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The STAAC maintains its recommended neutral equities allocation. An increasingly likely soft landing for the U.S. economy, growing earnings, and expected stability in bond yields help offset elevated stock valuations.
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In GWI, the Committee has moved to a neutral view on small cap stocks. High-quality small cap stocks are attractively valued and have made technical progress as market performance broadened out in recent weeks.
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The Committee also maintains a slight preference towards large cap growth, but slightly reduced that overweight tilt in March as value stock performance began to improve and the macroeconomic environment became more favorable for value stocks.
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The STAAC’s regional preference remains U.S. over developed international and emerging markets (EM) due largely to superior earnings and economic growth in the U.S. The Committee favors Japan over Europe amid supportive monetary policy and improved corporate governance.
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The STAAC continues to hold a strong overweight tilt in preferred securities as valuations remain attractive. However, the risk/reward for core bond sectors (U.S. Treasury, Agency mortgage-backed securities (MBS), investment-grade corporates) is more attractive than plus sectors. In our view, adding duration isn’t attractive due to persistent (but subsiding) inflationary pressures, and the STAAC remains neutral relative to our benchmarks.
This research material was prepared by LPL Financial, LLC. All information is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy.
Faith in Action
This month we would like to introduce you to 3Strands, working to empower Sacramento against human trafficking.
3Strands Global Foundation is deeply committed to combating human trafficking in the Sacramento area through tailored prevention, rescue, and restoration efforts.
By partnering with schools, community organizations, and law enforcement agencies, they deliver targeted prevention programs to educate individuals about the signs of trafficking and empower them to protect themselves and others.
Through collaborative efforts with local stakeholders, 3Strands supports the rescue and restoration of trafficking survivors, providing comprehensive services such as medical care, therapy, vocational training, and safe housing.
Additionally, they advocate for systemic change by engaging with policymakers and mobilizing community support to strengthen anti-trafficking efforts and improve support services for survivors. Through their multifaceted approach, 3Strands works tirelessly to create a safer, more resilient Sacramento community where human trafficking is eradicated, and all individuals are empowered to live free from exploitation and abuse.
If you would like more information or are feeling inclined to give to this cause you can find more information here:
Economic Update
The first quarter is in the books, and it was an excellent one for stocks. The S&P 500 index rode a resilient U.S. economy, easing inflation, rising corporate profits, and anticipation of summertime rate cuts from the Federal Reserve (Fed) to solid gains in March, the fifth straight winning month, and the best first quarter since 2019.
With stocks having done so well, it’s natural to think about selling. If you haven’t rebalanced in a while and hold more equities than targets, shifting some stocks into bonds or alternative investments may make sense. If your investing time horizon is long, the case for trimming equities is stronger because valuations matter more three to five years out.
If you’re focused on the next few months, consider that the latest data suggests the economy is growing steadily and inflation pressures continue to ease. Investment in artificial intelligence — still in the early innings — is giving corporate profits a boost and looks more like the early-internet period of the mid-1990s than the speculative bubble in 1999–2000. Double-digit gains in S&P 500 companies’ profits this year, which seemed like a long shot at the start of the year, are now possible.
History also suggests staying the course. Since 1950, the S&P 500 has risen 93% of the time in the 12 months following a five-month streak, with an average gain of over 12%. And down years are rare after strong first quarters. So, while stocks are due for a pullback, as the choppy start to April suggests, it’s extremely difficult to sidestep a 5–10% decline. It’s tough to make a case for a big drop — one that might make sense to try to avoid — because of healthy market fundamentals.
The common refrain from the bears that the stock market’s gains are too concentrated has not held up lately. Technology stocks showed signs of fatigue in March, while cyclical value stocks that benefit from the improved economy picked up the slack. This rotation helped the energy, financials, and industrials sectors outperform in March while the average stock beat the index.
Turning to bonds, yields remain attractive following the latest rise in rates. A gradually slowing economy and easing inflation should limit additional selling pressure in the bond market, especially if the Fed cuts rates this summer as expected. Last week’s successful Treasury note auctions were encouraging. Corporate bond yield spreads, which tend to sniff out trouble before stocks, are about as calm as they get compared to Treasuries.
Solid fundamentals and history suggest investors stay the course, though a small allocation shift may make sense for those overdue for a rebalance or with long investing time horizons. Risks seem manageable at this time, though we continue to watch inflation, rates, and geopolitics closely.
As always, please reach out to me with questions.
Sincerely,
David Laut
CEO, Certified Financial Planner™
O / 916-846-7780
A / 4180 Douglas Blvd. Suite 200, Granite Bay, CA 95746
Important Information
This material is for general information only and is not intended to provide specific advice or recommendations for any individual. There is no assurance that the views or strategies discussed are suitable for all investors or will yield positive outcomes. Investing involves risks including possible loss of principal. Any economic forecasts set forth may not develop as predicted and are subject to change.
References to markets, asset classes, and sectors are generally regarding the corresponding market index. Indexes are unmanaged statistical composites and cannot be invested into directly. Index performance is not indicative of the performance of any investment and do not reflect fees, expenses, or sales charges. All performance referenced is historical and is no guarantee of future results.
All data is provided as of June 6, 2023.
Any company names noted herein are for educational purposes only and not an indication of trading intent or a solicitation of their products or services. LPL Financial doesn’t provide research on individual equities.
All index data from FactSet.
The Standard & Poor’s 500 Index (S&P500) is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.
This Research material was prepared by LPL Financial, LLC. All information is believed to be from reliable sources; however LPL Financial makes no representation as to its completeness or accuracy.
Bonds are subject to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rates rise and bonds are subject to availability and change in price.
There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.
Past performance does not guarantee future results.
Asset allocation does not ensure a profit or protect against a loss.
For a list of descriptions of the indexes and economic terms referenced, please visit our website at
lplresearch.com/definitions.
