Fortis Wealth Management

(888) 336-7847 (3FORTIS)

www.investfortis.com

February 2024
Market Update
(all values as of 12.31.2025)

Stock Indices:

Dow Jones 48,063
S&P 500 6,845
Nasdaq 23,241

Bond Sector Yields:

2 Yr Treasury 3.47%
10 Yr Treasury 4.18%
10 Yr Municipal 2.73%
High Yield 6.48%

YTD Market Returns:

Dow Jones 13.07%
S&P 500 16.46%
Nasdaq 20.36%
MSCI-EAFE 27.89%
MSCI-Europe 31.95%
MSCI-Pacific 29.87%
MSCI-Emg Mkt 30.58%
 
US Agg Bond 7.30%
US Corp Bond 7.77%
US Gov’t Bond 6.88%

Commodity Prices:

Gold 4,325
Silver 70.34
Oil (WTI) 57.42

Currencies:

Dollar / Euro 1.17
Dollar / Pound 1.34
Yen / Dollar 156.18
Canadian /Dollar 0.73

Macro Overview

Financial markets started the year with an eye toward earnings, the upcoming election, and developments in the Middle East and Ukraine. Markets are eagerly waiting for the Federal Reserve to finally commence its rate reduction trajectory. Analyst opinions vary on when it will happen, but expect that rate decreases will start by the middle of the year.

Stock performance was mixed in January, as some sectors lagged while others excelled. Sectors including consumer discretionary, real estate, and utilities lagged in January, while financials, healthcare, and communication stocks rose. Analysts deem such a disparity among sectors as “sector rotation,” which is indicative of a possible change in the direction of the economy.

Gross Domestic Product (GDP) growth for the 4th quarter of 2023 came in at 3.3%, stronger than expected by economists. Concurrently, consumers are contributing slightly less to economic growth as measured by Personal Consumption Expenditures (PCE), representing roughly 67.6% of GDP. In comparison, consumers contributed 69% to GDP two years ago. Economists track this metric closely since a significant portion of GDP is driven by consumer expenditures.

The Federal Reserve continues to struggle with the threat of lingering inflation. Federal Reserve officials are mixed about when the Fed will begin to reduce rates and how sizable the initial reductions will be. For now, the Federal Reserve is holding rates steady but may change course depending on economic data.

Federal government bank regulators, including the FDIC, the Office of the Comptroller of the Currency, and the Federal Financial Institutions Examination Council, are increasingly focused on the liquidity of regional banking institutions. Last year’s bank failures prompted an increase in scrutiny of various banks and their financial integrity.

The Baltic Dry Index, which measures the cost of transporting commodities and essential goods across the globe, is back to pre-pandemic levels. Shipping costs and transportation rates rose sharply during the pandemic, driving price increases from commodities to finished products. Economists note that the drop in shipping and commodity prices is indicative of lower inflation and a potential global slowdown of commerce activity.

Sources: Federal Reserve, Labor Dept., FDIC, OCC, FFIEC, Baltic Dry Index

 
consumers make up 70% of gdp

Stocks Start Year Off With Slight Gain – Domestic Equity Overview

Domestic equity indices were mixed in January, as selective sectors outperformed other sectors. The disparity in performance, known as “sector rotation”, can be driven by a shift in consumer sentiment and economic activity. Major equity indices started the year with gains, as optimism regarding a pending Fed rate cut and economic growth helped fuel a slight rise in stock prices. The Dow Jones Industrial Index, the S&P 500 Index and the Nasdaq index all gained more than 1% year-to-date as of the end of January. (Sources: Dow Jones, S&P, Nasdaq)

Rates Hold Steady – Fixed Income Review

Interest rates held steady as the Federal Reserve opted to maintain current levels, given that inflation worries are still a concern for several Fed members. The yield on the 10-year Treasury Bond ended January at 3.99%, up slightly from the 2023 close of 3.88%. Short-term bond yields remain higher than longer-term bond yields, indicative of a continued inverted yield curve. Some analysts expect yields to level out when the Fed begins to unwind its tightening policy as it lowers short term rates. (Sources: Federal Reserve, U.S. Treasury)

Consumers Drive Economic Growth, Not Government – Consumer Expenditures

Every month, the Department of Commerce releases its Gross Domestic Product (GDP) report. This report is the most recognized indicator of how the economy is performing.

GDP is made up of private consumption, gross investment, government spending, and net exports. The single largest contributor of these components is consumer consumption, making up nearly 70% of GDP.

Historical data provided by the Bureau of Labor Statistics shows that U.S. economic growth has steadily become more reliant on consumer expenditures. Consumer expenditures as a percentage of GDP rose over the past three years to their highest levels since the end of World War II. Data from the Federal Reserve show that consumers have adjusted their spending behaviors, relying less on credit and more on government stimulus payments during the pandemic, notably different from the peak of easy credit seen in 2004-2006.

Sources: Commerce Department, BLS, Federal Reserve

 
Americans are paying on a record $1.6 trillion of auto loans currently

Benefits Of A Trust Versus A Will – Estate Planning

A properly drafted will or trust is essential for anyone who has assets to leave to heirs. Both a will and a trust allows you to designate anyone you wish as beneficiaries to receive assets.

The primary difference between the two is that assets held in a trust will avoid probate upon one’s passing, which can be time-consuming and costly. A trust structured as a revocable living trust can provide inheritance structure and tax simplicity for assets placed within the trust. In 2024, the first $13.61 million (per individual) & $27.22 million (per married couple) is excluded from estate taxes with any assets over that amount taxed at the Federal Estate Tax Rate.

If you own property in a separate state, a living trust eliminates the need to probate that property in that state. A living trust can immediately transfer management of your property if you become incapacitated either physically or mentally. There is no requirement to go to court to appoint a guardian or conservator.

If you choose to create a living trust, you may also create what is called a pour-over will. It provides for the transfer into the trust of any property that was not previously included. (Source: IRS)

Car Prices Are Falling – Auto Industry Review

Years of consecutive increases in U.S. auto sales have produced a glut of vehicles on U.S. highways. A significant number of vehicles went to market with a lease, leading to a deluge of cars flowing back onto the market as lease terms expired.

As automakers added manufacturing capacity, they were increasingly aggressive in offering subsidized incentives on new vehicles in order to maintain record sales momentum. That has put downward pricing pressure on the entire car market.

Consequently, the number of drivers that owe more on their cars than they are worth is surging. Americans are currently paying on a record $1.6 trillion of auto loans, according to the most recent Federal Reserve data. That represents roughly half of all licensed drivers in the U.S. Among those individuals who carry loan balances, the Federal Reserve estimates that auto loans make up between 10 percent and 23 percent of their total financial obligations. Auto prices soared as the pandemic took hold in 2020 through 2022, while supply constraints for critical auto components hindered manufacturing and distribution of automobiles globally. Those constraints have since subsided, resulting in a reversal of pricing pressure. (Sources: Federal Reserve Bank of St. Louis)

 
72.5 million Americans, identified as households, pay no federal income tax

World’s Largest Energy Consumers – Global Energy Demand

As China and other developing countries grow their middle class populations and build new cities and roads, the demand for energy is increasing immensely.

China continues to build and expand its infrastructure to accommodate a population of over 1.4 billion people, while the United States has a significantly smaller population to accommodate with 331.9 million. The U.S. has increasingly become more of an energy producer and less of an energy consumer, due in part to technology advances and slower economic expansion.

The abundance of newly extracted oil and natural gas from the United States has contributed to the advancement of energy technology. Radical new processes and methods of locating oil and natural gas reserves have propelled the U.S. to a position as a world leader for energy resources.

As emerging and developing countries grow, so does the demand for energy. Electricity is essential to build and drive a country’s manufacturing sector and infrastructure. Several energy market analysts note that long-term global growth has fueled the steady rise in energy prices, more so than geopolitical events. (Source: U.S. Energy Information Administration (EIA))

40% of Americans Pay No Federal Income Tax – Fiscal Policy

Disparity of income is a outsize topic of discussion for politicians and activist groups. Notwithstanding that fact, those who earn the higher incomes pay for the vast majority of taxes.

An estimated 72.5 million American households pay no federal income tax. The non-partisan, non-profit tax group known as The Tax Policy Center released income tax data it analyzed for 2022 and found that nearly half, about 40% of American households, paid no federal income tax in 2022. The Tax Policy Center study also found that 24 million of the 72.5 million not paying taxes are aged 65 or older, many of whom are living primarily on Social Security benefit payments.

Generous tax credits and low tax brackets for low-income earners allow for minimal-to-no federal tax payments. The Tax Policy Center found, however, that lower income households pay a much larger share of state, local, property, sales, and excise taxes. The ultra wealthy, defined as the top 1% of taxpayers, with annual incomes of about $2 million, pay about 42.3% of all of the federal income taxes in the U.S. (Source: Tax Policy Center/Washington D.C.)

 

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. Any and all forecasts mentioned are for illustrative purposes only and should not be interpreted as investment recommendations.