Market Update
(all values as of 12.31.2023)

Stock Indices:

Dow Jones 37,689
S&P 500 4,769
Nasdaq 15,011

Bond Sector Yields:

2 Yr Treasury 4.23%
10 Yr Treasury 3.88%
10 Yr Municipal 2.27%
High Yield 7.39%

YTD Market Returns:

Dow Jones 13.70%
S&P 500 24.23%
Nasdaq 43.42%
MSCI-EAFE 15.03%
MSCI-Europe 16.68%
MSCI-Pacific 12.07%
MSCI-Emg Mkt 7.04%
US Agg Bond 5.53%
US Corp Bond 8.52%
US Gov’t Bond 5.72%

Commodity Prices:

Gold 2,071
Silver 24.02
Oil (WTI) 71.33


Dollar / Euro 1.10
Dollar / Pound 1.27
Yen / Dollar 140.98
Canadian /Dollar 0.75

Midyear Perspective

As America continued to recover from the COVID-19 pandemic in the first half of 2021, the economy and capital markets marched forward as businesses reopened and life began to return to normal. At the start of 2021, vaccines were just starting to be distributed. Only six months later everyone in America who wants to be vaccinated has been, or can be, at their discretion. Entering July, over half of the U.S. has been vaccinated with at least one shot. This, combined with estimates of individuals who have already had the virus, suggests that over 70% of the U.S. population has at least some immunity to COVID-19, likely approaching the experts’ definition of heard immunity (70-90%). COVID-19 and its variants continue to be a wild card, but one that the capital markets have largely learned to ignore.

The last year and a half has been a challenging time to be a long-term, goal oriented investor. We not only had to navigate the pandemic of a century, which temporarily decimated businesses, the economy, and investor portfolios, but we have had possibly more “distractions” presented to us than ever in history. On top of the never ending predictions about how, why, and when the stock market will collapse into ruin, many investors have struggled mightily to deal with a new challenge…FOMO, or the fear of missing out. Stories of cryptocurrency and Tesla millionaires have been plastered across social media. The “meme stock” saga which saw retail investors bring hedge funds to their knees by buying up shares of near bankrupt stocks such as GameStop and AMC has been a revolving headline on CNBC for over a year. Investors piled dollars into small and large technology companies despite elevated valuations and experienced upwards of 100% returns in some cases. With so many get rich-quick-stories, it is hard, if not impossible, to tune out this constant background noise.

Diversified investors have had to endure this craze for some time and may be questioning why they aren’t participating in the “easy money”. Is my portfolio return enough when my neighbor is bragging about doubling his money in 7 months? I have often found the real truth to these stories is never quite what it seems. Much like a gambler who only tells you about his winners and never his losers, the odds of consistently making a profit trading in and out of high risk, high reward investments is extremely low, and there is certainly no basis for creating a financial plan on this strategy. Someone risking money at the age of 20 on a moonshot investment, whether it triples in the next year or goes to zero, is quite irrelevant to their long term future. On the other hand, someone near or currently in retirement does not have the time or capacity to realize a permanent, significant loss to their nest egg betting a significant amount on a grand slam.

Unlike rolling the dice on a large speculative bet, the broad stock market has a long history of return data in which a real financial and retirement income plan can be developed, using reasonable historical assumptions. Maybe more impressive than the S&P 500’s price level increasing from 58 to over 4,200 in the last 61 years is that the income the index provides has also gone up around 30 times, averaging around 6% dividend growth. Combined, this price appreciation and income growth has far outpaced most other investment avenues when it comes to helping to maintain a family’s lifestyle, combat the dollar erosion of inflation and taxes and leave a meaningful legacy to heirs or charitable institutions. My advice for gambling will always be to do it with only what you can afford to lose.


Equity Overview

First quarter earnings season far exceeded initial estimates with 52% year over year earnings growth, more than doubling the consensus estimate. 87% of companies beat their earnings estimates, the highest number ever recorded. Rising 2nd quarter estimates and accelerating economic growth suggest this earnings boom will likely continue in the near-term.

LPL’s investment committee continues to favor stocks over bonds based on the current interest rate environment and growth expectations.  There has been a sentiment shift this year from growth stocks to value, a trend that is likely to continue throughout the recovery. A durable economic recovery is typically supportive of value stocks that tend to perform well as growth accelerates. Additionally, value stocks may provide a meaningful uptick to portfolio yield with expectations for fixed income diminishing. LPL maintains an overweight investment tilt to materials and financials as well as a recent upgrade to industrial stocks as a part of their global portfolio positioning.

It should be expected that growth stocks, specifically large technology companies, will continue to be supported from strong earnings trends as the pandemic winds down, however, LPL’s investment committee believes we could continue to see a rotation as the rest of the economy opens and the work from home trend slows. While the foundations of growth stocks are solid, technology stock valuations are stretched which could present some downside risk as we move into next year.

Fixed Income Overview

As has long been our view, bond investments will likely be challenged to achieve meaningful return over the near term. The result of easy monetary policy in response to the recession has left the 10-year treasury yielding around 1.5% with the potential for rising inflation and interest rates on the horizon. LPL’s investment committee maintains a negative view for interest rate sensitive bonds such as U.S. Treasuries. Portfolios should be constructed with a blend of high quality, short duration bonds with tempered expectations for return and yield.

Municipal bonds look favorable for non-retirement accounts, especially for families in high tax brackets. Their valuations are elevated compared to Treasuries, however, federal stimulus and the expectation of higher tax rates are supportive to municipal bond markets.

While near term return from bond looks to be dismal, there does continue to be a place in portfolios for fixed income. Bonds have continued to be a solid diversifier and hedge in the event of a stock market or economic collapse.

Macro Overview

The American economy continued its dramatic recovery in the first half of 2021. This was accelerated by the widespread distribution of effective COVID-19 vaccines and the subsequent reduction in critical cases, as well as a massive amount of government fiscal stimulus. The economy continues to struggle with supply chain disruptions and worker shortages across all sectors. Demand for labor has skyrocketed as businesses wrestle with how to keep up with the windfall of pent up demand. Prolonged unemployment benefits, continued pandemic worries, childcare issues, and early retirements in 2020 have exacerbated the situation-issues that will hopefully begin to smooth out as we enter the fall.

The country is still in the midst of an unprecedented amount of fiscal and monetary stimulus. The long term outcome of an experiment of this magnitude is impossible to forecast. It is quite possible that the economy has been overstimulated, as has been highlighted by a resurgence in inflation in the last quarter. At the June FOMC meeting, Fed Chair Powell indicated his awareness of this risk and his preparedness to act against it. It is important to mention that while stronger growth is normally followed by higher inflation, the Fed continues to view this near-term inflation spike as “transitory”. The Fed may be comfortable overshooting their 2% target, but the risk of inflation running much higher for a period of time is not out of the picture given the amount of money printing that has taken place.

We hope you had a fantastic 4th of July! Please reach out with any questions.


Securities and advisory services offered through LPL Financial, a registered investment advisor. Member FINRA/SIPC

Important Disclosures

Market Returns: All data is indicative of total return which includes capital gain/loss and reinvested dividends for noted period. Index data sources; MSCI, DJ-UBSCI, WTI, IDC, S&P. The information provided is believed to be reliable, but its accuracy or completeness is not warranted. This material is not intended as an offer or solicitation for the purchase or sale of any stock, bond, mutual fund, or any other financial instrument. The views and strategies discussed herein may not be appropriate and/or suitable for all investors. This material is meant solely for informational purposes, and is not intended to suffice as any type of accounting, legal, tax, or estate planning advice. The economic forecasts set forth in this material may not develop as predicted and there can be no guarantee that strategies promoted will be successful. 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. Dividend payments are not guaranteed and may be reduced or eliminated at any time by the company. Value investments can perform differently from the market as a whole. They can remain undervalued by the market for long periods of time. Because of their narrow focus, sector investing will be subject to greater volatility than investing more broadly across many sectors and companies. 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.Municipal bonds are subject to availability and change in price. They are subject to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rates rise. Interest income may be subject to the alternative minimum tax. Municipal bonds are federally tax-free but other state and local taxes may apply. If sold prior to maturity, capital gains tax could apply. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.