A recent study reviewed the 2024 S&P 500 return estimates from 20 prominent banks and asset managers, made at the end of 2023. The closest estimate was off by 12% and the median prediction missed by 23% versus the actual return. Be cautious with forecasts for 2025.
Crime related to fraudulent new accounts
is responsible for 80% of all identity fraud reports. If you haven’t already, consider freezing your credit at TransUnion, Experian, and Equifax to help prevent unauthorized credit cards and loans being opened in your name.
A recent Vanguard study highlighted the
difficulty in market timing: If an investor invested $100,000 from 1996 to 2024 into a balanced 60/40 portfolio and left it alone, it would be worth $865,000. If they tried to time the market and missed out on just the best 5 days, they would be left with $659,000. Similarly, they would have $540,000 if they missed just the best 10 days.
In the past four years, the S&P 500 has
experienced two bear markets resulting in declines of more than -33% in 2020 and -24% in 2022. Despite these declines, the S&P 500 has gained more than 58% over this period. Focusing on the bigger picture and tuning out the short-term noise is helpful in maintaining your long-term strategy.
In 2023, Elser Financial clients gifted more
than $8.6 million tax efficiently to charities
through donor-advised funds and qualified
charitable donations. Thank you for giving
back to your communities!
The Federal Reserve held interest rates
steady in September, but kept open the option of another rate hike in the near term. They forecasted that rates may stay above 5% through 2024 due to a resilient labor market.
The growth in the market in the first 5 months was largely due to a small group of stocks, demonstrating the difficulty in selecting the “winners” (see reverse side graph). Although economic indicators have been signaling a slowing U.S. economy, breadth expanded in June and the markets performed well.
It is worth noting that the failure of Silicon Valley Bank and Signature Bank were not systematic banking industry problems, but rather a result of 90% of the deposits at these banks exceeding FDIC insurance limits, and a high industry concentration to cash-demanding venture capital and crypto firms.
Historically, both the economy and the stock market experience natural, yet unpredictable, economic cycles, expanding for 8 out of 10 years and contracting for 2 out of 10. When wages and prices soar, the Fed raises interest rates to slow these down. As the Fed slows the pace of their rate hikes, we will look to lengthen the duration of our bond portfolios to lock in higher yields for longer periods of time.
The economy as a whole, with rising consumer spending, normalizing supply chains, and a tight labor market, is still strong. As interest rates rise, short-term bonds continue to hold up better than long-term bonds. Many short-term bonds are now paying over 4%.