January 2024 Market Update

What Is New In The New Year

“Last year, I told you that “Nearly 100% of us have dreams, 60% of us have goals, three percent of us write them down, one percent of us have a written plan, and less than one percent consistently take action to execute on that plan.”

These numbers have not changed.  Be better than the 1%!

The clock struck midnight, the fireworks began, and our family stood on one foot, our right foot, so we could all say we started the year on the right foot.  It is a curious notion to me that we associate the turning of the calendar with a new beginning.  January 1st seemed to me to be much the same as December 31st. Of course, this is true; we measure things as of year-end, but the rhythm of life, the rhythm of the markets, stays the same.  It is easy to look at your life or portfolio based on an arbitrary 12 months of data and decide whether you won or lost.

The truth is that the calendar should not measure life, the economy, and your portfolio but rather by where you are in your life versus where you wish to be in the future.

It is essential to measure performance and dig a bit deeper to discover why it is the way it is, lest you be doomed to repeat poor performance or not recognize actions leading you to success as you define it

Nothing special happens on January 1st

So, when do you plan if nothing magical happens on this day? Many reading this note know we suggest a written plan at the beginning of the relationship, no matter when that happens.  We do not like waiting until the end of the year in the event of a significant life event; these plans often need to be adjusted or at least reconsidered.  If there are no major life events, we suggest revisiting the plan once a quarter.  We rarely suggest the year’s beginning or the year’s end for a major planned revamp.  The reason is that the end of the year may not give you time to adjust taxes, and the beginning of the year may leave you with regrets that you missed an end-of-year tax deadline.

The market moves faster than it did when I started in this business three decades ago.  You need to be able to look further into the distance for a long-term investor. In many cases, those in or near retirement should have an easier time because they mainly need to understand how to consistently deliver the cash flow they need to sustain their lifestyle and worry less about growth.  This assumes they have planned well earlier on.

With those two goals in mind, let’s look into the 2024 crystal ball.

Cash flow, Not Cash, is King:

For your cash flow, traditional fixed-income bonds are still not an excellent source for many retirees.   The yield curve remains inverted, with the long-dated maturity bonds paying less than shorter-dated maturities.   This tells us that the markets believe we will see lower rates in the future, and they never bought into the idea that the Federal Open Market Committee (FOMC) would hold rates higher for longer.  This could also indicate that the “smart money” is warning of the potential for deflation.  (GASP!)  That is a word we have not heard in a while!

This puts some retirees in a bit of a pickle.  Purchasing short-dated fixed income is great for now, but the risk is that when you need to reinvest it, the yields may be lower. If you purchase longer-dated maturities, you face higher volatility, the rates being higher later. At the same time, you are locked in and may still not be provided a high enough cash flow.

There are answers to address these concerns, and I encourage you to ask your financial professional what the right plan is for you and don’t settle for “the same way we have always done it.”  Because what got you here is not likely to get you where you need to go.  The market has changed drastically.

Growth Minded Investors:

Some of you are thinking about Elton John’s Rocket Man ‘burnin’ out his fuse up here alone and I think it’s gonna be a long, long time till growth comes round again.’    Sure, we had the magnificent seven this year, but all these innovative companies are making money with plenty of cash on the balance sheet and making sales and money without the stock price movement to show for it!   We saw this turn sharply toward the end of 2023, and I believe we will continue, albeit with some bumps along the way, to see this rise continue in 2024.

Most of us have been duly impressed with artificial intelligence’s (AI) ability already.  However, as Axel Hammond said in 42nd Street, ‘You ain’t seen nothing’ yet!’ Remember, it was just this year that ChatGPT launched, and frankly, it has been the new toy every company, and many individuals have been playing with ever since its release.  The true power of AI lies in things most of us, including me, have not even thought of yet—new developments and innovations developed at lightning speed.

AI is the basis for Augmented Reality (AR) or machine learning and robotics, 3D printing machines, and tools that were impossible to produce just a year earlier.  When did we last have five major innovations like the personal computer or the internet happening simultaneously?   When was the last time we had five significant innovations all working together to bolster one another?   NEVER.

With each significant innovation from the discovery of fire, the wheel, the railroads, automobiles, robotic manufacturing, and the list could go, we, as a society, had big bumps along the way. Still, productivity increased, and innovation created more but different jobs.

The opportunity for investors is to research, dig a little deeper until you identify the winners early, and then be patient.   Be careful never to get so cocky or greedy that you think you KNOW anything, which means staying diversified.   Pay attention to innovations that don’t seem flashy or exciting.  If you feel like you are a little too late or even a little early, dig into the suppliers of these industries. Where do some have advantages or disadvantages?

Understanding & Accepting That You Don’t Know:

The reality is that nearly every investor needs some growth and some income.  Some need more of one than the other, depending on their stage of life and risk tolerance.

For both growth and income investors who see incredible opportunities to become that “overnight millionaire” (you know, the guy who bought Amazon at $2 and held it.), don’t fall prey to the siren song of not diversifying your assets or income streams.

Using several strategies simultaneously is the secret to investing in success and building your best life.   Yes, it gets complicated, even complex, so you need to sit with a professional who thinks outside the box and listens to you.   One who does not simply put you into five or six mutual funds or Exchange Traded Funds and tell you all is well, but someone who looks at your entire life plan, brings in experts where necessary and ensures you understand what and why you own what you own.

Conclusion:

We remain optimistic about the markets over the next 12 to 18 months and believe there will be numerous opportunities for prudent investors willing to adapt to changing market conditions.  A well-balanced and diversified portfolio across asset classes and sectors combined with prudent use of alternative investments mixed in a way that meshes well with your personal risk tolerances provide the potential for a profitable upcoming year, in our opinion.

This note is not meant to be taken as personal investment guidance.  Each situation is different, and an in-depth conversation with a qualified professional is my best advice before adjusting your plan.  My encouragement is to stick to your long-term (five years or more into the future) strategy and remember your goals unless you have a significant life change that causes you to need to adjust that strategy.

If you would like to learn more about how to create your paycheck protection program in retirement so you are not worrying about running out of money or not being able to live your best life, reach out to us at the Contact Us section of Guardianrockwealth.com or by texting the word LIFE to 321-421-5213

Define your outcome and allow a skillful artisan to help you create it.

Please remember that this note is our opinion from a broad perspective based on over three decades of money management experience and is not personal investment advice.

For more information and a copy of the Amazon Best Selling Book Build A Life Not a Portfolio, text the word LIFE to 321-421-5213

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Talk soon,

John

Phone: (561-) 327-4646

Email: jbrowning@advocacyinvesting.com

John Browning, MBA, and CSA®