2024 Mid-Year Market Comments

“All of us would be better investors if we just made fewer decisions.”

- Daniel Kahneman (1934-2024)

The Markets have been kind to all of us over the last 8 months (dating back to approximately November 1), especially for those investors who have maintained a strategic, long-term perspective.

As we usually do in these reports, we ask that we first remember a handful of timeless truths about enduringly successful wealth management. Then, we can proceed to some more current observations.

General Principles

• We are goal-focused, plan-driven, long-term equity investors. Our portfolios are derived from and driven by your most cherished lifetime financial goals, not from any view of the economy or the markets.
• We do not believe the economy can be consistently forecast, nor can the markets be consistently timed.
• We do not believe it is possible to gain any advantage by going in and out of the markets, regardless of current conditions.
• We, therefore, believe that the most efficient method of capturing the full premium compound return of equities is by remaining fully invested all the time.
• We are thus prepared to ride out the equity market's frequent, often significant, but historically always temporary declines. We believe that even during such trying episodes, our reinvested dividends will be buying more lower-priced shares—and that the power of equity compounding will be continuing, to our long-term benefit.

Current Commentary

• The first six months of 2024 can be simply but accurately summed up in two observations.

1. The U.S. economy continued to grow, however modestly.
2. The equity market—responding to accelerating earnings growth and dividend increases—did very well indeed.

• The U.S. and (to a lesser extent) global equity markets continue to generate positive returns for investors, the bond market is settling down, and the long-predicted recession keeps being moved back by the market pundits. It's almost easy to forget that bear markets ever happen, given the returns of last year and this year's first two quarters.
• Economic growth remained marginally positive, continuing to avoid recession, while job growth continued relatively strong.
• Inflation slowed very grudgingly, providing the Federal Reserve with no urgent prompting to reduce interest rates.
• Monetary policy remains gently but quite firmly restrictive—that is, the fed funds rate is well above the inflation rate—as we believe long-term investors should want it to. Getting inflation down to the Fed's target two percent remains Job One.
• Even without stimulating rate cuts, the equity market advanced solidly across a broad front: all three major stock indexes are significantly into new high ground.
• The impetus for this has been just what it fundamentally ought to be: strengthening earnings and rising dividends.
• Bloomberg's current estimates are for the S&P 500's earnings to be up something like 8.8% this year, followed by a further 13.6% increase in 2025.
• Even though cash dividend payments to shareholders are at record high levels, S&P 500 companies are still paying out a below-average percentage of earnings (about 37% versus the average for the last 30 years of nearly 46%).
• Between that and sharply increasing earnings, there would appear to be quite a bit of room for further dividend growth this year and next.
• Earnings and dividends are the variables that ultimately drive the long-term value of our core investment asset: ownership of equity in a broadly diversified portfolio of enduringly successful companies.
• Not the national debt, not the looming election, not the presence or absence of Fed rate cuts, not war(s), not the onset of the next regularly scheduled government shutdown “crisis.”
• The chief worry as we enter the third quarter is that much of the equity returns are coming from a small handful of AI-related companies. The companies that are most closely associated with AI developments—Nvidia, Apple, Amazon, Meta, and Microsoft—are soaring even as the rest of the market is taking a pause.
• As a result, the S&P 500 is also soaring, on a very thin number of big winners. Microsoft has seen its shares soar nearly 75% since the beginning of last year, after announcing its OpenAI initiative. NVIDIA's share price has increased 149.48% in the first two quarters of this year. Amazon, which provides extensive server farms, is up more than 27% this year.
• We continue to believe that the more we focus on the fundamental strengths of our core asset, the more we're able to tune out the noise, and the less danger we will be in of emotional overreaction to gyrations in “the stock market.”
• We believe in your plan, and we like what we own on your behalf.

As always, thank you for the introduction of your friends and family, which so many of you have made. We are honored to serve you! As a service to our clients, we are happy to act as a sounding board for your friends and family. If any of them should need a second opinion on their financial situation, introduce them to www.striblingwhalen.com or call us at 678-989-0048.

Regards,

Any opinions are those of Stribling~Whalen Financial Group and not necessarily those of Raymond James. Expressions of opinion are as of this date and are subject to change without notice. There is no guarantee that these statements, opinions, or forecasts provided herein will prove to be correct.

Investment advisory services through Raymond James Financial Services, Inc. Stribling~Whalen Financial Group is not a registered broker/dealer and is independent of Raymond James Financial Services.