LIFE Newsletter February 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
“A slack hand causes poverty, but the hand of the diligent makes rich.”
Proverbs 10:4 ESV
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 based on the Committee’s assessment that the risk-reward trade-off between equities and fixed income is roughly balanced despite strong year-to-date gains given the improved economic backdrop.
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The Committee favors large cap stocks over their smaller brethren due to a potential economic slowdown in coming quarters.
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If the downward trajectory in inflation remains intact and interest rates stabilize or fall further, growth style stocks may continue to outperform.
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The STAAC favors U.S. equities over developed international due to a relatively stronger domestic economic growth outlook and superior earnings power, though the Committee still finds Japanese equities attractive.
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The bond market likely front-ran Fed rate cuts for 2024 so with the strong economic data recently, a repricing higher in Treasury yields was likely warranted, in our view. Additionally, Treasury supply is expected to increase in the coming quarters, which could keep upward pressure on yields. As such, our year-end 2024 target for the 10-year Treasury yield is 3.75% to 4.25%.
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The selloff in the banking sector provided an attractive opportunity in preferred securities; 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.
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 3 groups working to create lasting change in the Chico community, helping those through challenges of addiction and/or houselessness to get back on their feet.
Jesus Center
At the Jesus Center, they lead with a trauma-informed model and a strengths-based approach, ensuring sensitivity to the experiences of those we serve. Their programs are meticulously tailored to meet the diverse needs of individuals experiencing homelessness, reflecting our commitment to versatility and inclusivity.
Everything done at Jesus Center is guided and inspired by their four Core Values:
- CHRIST CENTERED: Founded in God’s love, they serve by respecting human dignity, offering hope and a path to transforming their lives.
- ACCOUNTABLE: Responsible stewardship of the resources provided by our supporters, volunteers and employees.
- COLLABORATIVE: In response to the complexity of homelessness, hunger and poverty, Jesus Center works with the community to restore those suffering from isolation to community integration.
- RESTORATIVE: Inspiring people to reach their full spiritual, physical, emotional and vocational wellness.
The Jesus Center believes that compassionate care drives transformative change.
If you would like more information or are feeling inclined to give to this cause you can find more information here:
True North Housing Alliance and Torres Community Shelter
True North is committed to supporting individuals on their journey to a better life. As a solution-driven organization, they focus on transforming lives today, equipping individuals with the tools for a brighter tomorrow.
Torres Community Shelter offers comprehensive support to individuals aged 18 and older in Butte County, operating around the clock, 365 days a year.
Beyond providing three meals, showers, and a safe place to sleep for up to 177 guests, they offer vocational training, enrichment activities, and personalized case management services. Established in 2003, Torres is True North’s longest-running program, dedicated to helping guests access healthcare, employment, and permanent housing.
If you would like more information or are feeling inclined to give to this cause you can find more information here:
Chico Rescue Mission
Rooted in Christian principles, the Chico Rescue Mission’s 12-month residential program offers a transformative journey, blending Christ-centered 12-step recovery with immersive Bible studies. Providing essentials like food, clothing, and shelter, they empower up to 90 men, year-round, with vocational training and re-establishing routines for successful community reintegration.
At their core, Chico Rescue Mission champions the ministry of reconciliation, fostering connections with loved ones and a God who embraces unconditional love. Join us in supporting this cause, as they embody the spirit of change and restoration.
If you would like more information or are feeling inclined to give to this cause you can find more information here:
Economic Update
Stocks are off to a solid start in 2024. January gains are particularly enjoyable because of the old adage from the Stock Trader’s Almanac, “As goes January, so goes the year.” Nearly 75 years of historical data shows that when the S&P 500 has risen in January, the average gain for the remainder of the year has been about 12%. This January, the S&P 500 was up 1.6%.
Stocks have also historically fared well after the broad index has reached a new all-time high, as the S&P 500 did last month for the first time in over two years. The average 12-month gain after a new high, with more than a 12-month wait between those highs, has been nearly 12%, with gains 13 out of 14 times.
Those new highs have prompted some to wonder if stock valuations are too rich. They’re elevated, no doubt, but they still look reasonable considering today’s interest rates. Interest rates and price-to-earnings ratios tend to move in opposite directions when rates are elevated. Big tech companies, like Alphabet, Meta, and Microsoft, are another justification for high valuations. Their impressive earnings power is the reason why earnings growth is poised to accelerate and should help prevent valuations from getting too stretched.
A soft landing for the U.S. economy, though not assured, may also help push stocks higher despite full valuations — assuming inflation continues to ease. The job market remained surprisingly strong in January, adding over 350,000 jobs as wages rose. Although that could possibly contribute to a delay in Federal Reserve (Fed) rate cuts until summertime, markets may have adjusted to fewer cuts already. Good news may be good news.
We see a lot of merit in the bull case, but the bears have plenty to support their case as stocks attempt to continue to climb the proverbial “wall of worry” and build on year-to-date gains. Presidential elections bring uncertainty, which may add some volatility even though stocks usually rise during election years. Commercial real estate continues to plague some regional banks.
A treacherous geopolitical climate cannot be dismissed, particularly a potentially wider conflict in the Middle East. Shipping goods around the world is taking longer and costing more. Military aggression by China toward Taiwan cannot be ruled out, nor can some spillover from China’s soft economy.
In reviewing the full picture of what to expect from markets this year, a resilient U.S. economy, easing inflation pressure, and growing earnings create a favorable backdrop for both stocks and bonds. But with high valuations and mounting geopolitical risks, modest positive returns appear most likely.
Please reach out to me if you have any 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.
