In Review - 2024 Q3
Better late than not, am I right? Welcome to Cook Financial’s quarterly newsletter. I had hoped to get this out in October but a little delayed.
My intention with this newsletter is to provide a quick insight into quarterly economic activities that may affect you or your financial portfolio. I hope to keep it brief, informative, and enjoyable. My focus will be on general economic information, market highlights, and brief commentary. Enjoy!
The Economy
In Q3 we had a Fed rate drop, the last time the Feds dropped their rate was back in March of 2020. So the times they are a changing. Typically this means that the Feds think the economy is on good footing. Time will tell. Inflation numbers are down. Unemployment numbers are down from a high but slightly increasing. Earnings are stable. GDP is up. These and more are what the Feds use to determine how the economy is doing. However, are those being felt on Main Street for everyday Americans? That is still to be seen. Feds are still optimistic that we’ll have a “soft landing” after major “jump starting” of the economy due to Covid.
The Markets
Markets are doing ok from a performance perspective. The S&P500 & Dow were down for the quarter: -0.93%, -0.41%, respectively. However, the 12 month for those same indexes look really positive: 33.12% & 26.09%.
When evaluating the markets, it's important to understand that many factors influence them. It's rare for a single factor to be the sole influence. Recent market movements may be due to a combination of factors, such as firms pulling back from AI investing, changes in Federal Reserve interest rates, discrepancies between GDP and GDI, political uncertainty, and a slowdown in consumer spending. However, the long-term outlook still remains positive, although the short term may be more muted than previous.
Thoughts
Cook Financial's investment philosophy is to balance three different strategies, with allocation to those dependent on each client and current market conditions. Our default is long-term views, with the goal of achieving the client's desired rate of return with minimal risk. However, short-term analysis can be informative.
an Equity component for growth and to combat inflationary pressures
an Indexed component to combat risk concerns and produce a minor level of growth and/or income
a Fixed component to combat volatility and unpredictability
Recent economic, market, and forecast data leads me to be “cautiously optimistic” in the Equity Component. I continue to use low-cost passive holdings for efficient parts of the market with low concern for Alpha. I use active managed holdings for inefficient parts of the market looking for some Alpha. Portfolio Tilt still leans towards a cautious sentiment with lower standard deviation and income-focused holdings. Small Cap and International holdings have been reduced some percentage points and reallocated to more Value and US-based holdings in hopes of combating a potential level, volatile, and/or slower economy.
The Index component is still looking good with “buffers” & “caps” at comfortable levels, even though they have pulled off slightly.
The Fixed component also still looks attractive with predictable rates still sitting around the 4.50% to 5% mark, which is nice to see.
