Broker Check

April 2024 Investylitics


Horizon Advisor Network Investment Committee April 8, 2024

Executive Summary

  • While many traditional recession indicators have been flashing caution signals for more than a year, a broad-based economic recession has not taken hold yet. In fact, to the surprise of many economists, recent indicators have slowly started to trend in a more positive manner once again.
  • Recent inflation measures have shown that price pressures have reemerged over the last few months. So far, the Fed’s narrative has been that this is a normal part of the bumpy road back to sustainably lower inflation rates.
  • At the beginning of the year, markets anticipated as many as six interest rate cuts by the Federal Reserve Bank, even though the Fed's projections only showed three. Over the last couple of months, the markets' expectations have come in line with the Fed, which reiterated its outlook for three rate cuts at its March meeting.
  • Many people worry that the market will inevitably pull back once it reaches a new all-time high. However, history shows that this is not necessarily the case. Markets also tend to do well in presidential election years, especially in the latter part of the year, as election outcomes remove uncertainty.
  • The committee continues to believe that disciplined diversification and rebalancing are wise strategies to employ during times of divergent asset class performance. Periodic rebalancing allows us to take advantage of these divergences.

The members of the Horizon Advisor Network Investylitics Committee met on the afternoon of Monday, April 8th. As markets continued to reach a series of new all-time highs during the month of March, we were happy to have the opportunity to review and share perspectives from the economists and market strategists we follow.

As we entered 2023, nearly all economists surveyed expected a recession to begin sometime over the next 12 months. Many traditional recession indicators with strong track records, such as an inverted yield curve and ongoing negative readings on the Conference Board's Index of Leading Economic Indicators, had been pointing toward a significant slowdown in the economy.

However, a broad-based economic downturn has not come…yet. In fact, to the surprise of many economists, recent indicators have slowly started to trend more positively once again. You can see this trend in our first chart below from our friends at ClearBridge. While there are no green indicators yet, many of the typical recession indicators have moved from red to yellow over the last six months.

The stock market continued its upward trajectory during March, and the S&P 500 Index advanced by more than 3%. While not all parts of the market participated at the same rate, we were encouraged to see some recent broadening of market breadth. As we move into April, we will begin seeing companies report earnings and revenues. Expectations are moderate for the first quarter.

However, as you can see in our second chart, there is an assumption that earnings growth rates will continue to accelerate throughout the year. There is also a consensus that earnings will expand more quickly in the broader market and not be contained to just a few tech and AI-driven companies. This would be great news for investors, as the combination of higher earnings and lower valuations could keep the market moving higher throughout the year.

One thing that could throw a monkey wrench into the stock market's upward march is the potential that re-emerging inflation pressures could put the Federal Reserve Bank's planned interest rate cuts on hold for longer than expected. As you can see in our final chart below, inflation measures have shown that price pressures have reemerged over the last few months. So far, the Fed’s narrative has been that this is a normal part of the bumpy road back to sustainably lower inflation rates.

At the beginning of the year, markets anticipated as many as six interest rate cuts by the Federal Reserve Bank, even though the Fed's December projections only showed three. Over the last couple of months, the markets' expectations have come in line with the Fed, which reiterated its outlook for three rate cuts at its March meeting. It has been somewhat surprising to see the market continue to rise in the face of higher inflation pressures and lower rate-cut assumptions.

We have heard concerns from many of our clients that the market will inevitably go through a downturn because it has reached a new all-time high. However, history shows that this is not necessarily the case. This is especially true since it had taken more than two years for the market to recover from its most recent downturn before reaching new record high levels. Markets also tend to do well in presidential election years, especially in the latter part of the year, as election outcomes remove uncertainty. While none of these guarantee future returns, we do pay attention to historical patterns.

The committee continues to believe that disciplined diversification and rebalancing are wise strategies to employ during times of divergent asset class performance. Many asset classes have not performed as strongly as the cap-weighted indexes and, therefore, have lower valuations. Periodic rebalancing allows us to take advantage of these divergences by selling high and buying low.

The investment committee appreciates your continued trust and support. We will continue to diligently watch and research our economic landscape and be ready to act if or when needed to manage your hard-earned assets. We take this responsibility extremely seriously. As always, if you have questions about your unique situation, please do not hesitate to give us a call.

© 2024 Jesse Hurst

The views stated are not necessarily the opinion of Cetera and should not be construed directly or indirectly as an offer to buy or sell any securities mentioned herein.  Due to volatility within the markets mentioned, opinions are subject to change without notice. Information is based on sources believed to be reliable; however, their accuracy or completeness cannot be guaranteed.  Past performance does not guarantee future results.

Investors cannot invest directly in indexes. The performance of any index is not indicative of the performance of any investment and does not take into account the effects of inflation and the fees and expenses associated with investing.

INVESTYLITICS TEAM OF HORIZON ADVISOR NETWORK

Jesse Hurst - Chair, Impel Wealth Management

Nathan Ollish - Impel Wealth Management

Clint Gautreau, Horizon Financial Group

Kevin Myers, ATL Global Advisors

Grace Hayden, Atlanta Planning Group

Dusty Green, Spencer Financial Inc.

Sincerely,

Jesse W. Hurst, CFP®, AIF®
CERTIFIED FINANCIAL PLANNERTM
Financial Advisor

*Award Recipient Jesse Hurst 

*The 2021 ranking of the Forbes’ Best–in–State Wealth Advisors1 list was developed by SHOOK Research and is based on in–person and telephone due–diligence meetings to evaluate each advisor qualitatively and on a ranking algorithm that includes client retention, industry experience, review of compliance records, firm nominations, and quantitative criteria (including assets under management and revenue generated for their firms). Overall, approximately 32,725 advisors were considered, and 5,000 (approximately 15.3 percent of candidates) were recognized. The full methodology2 that Forbes developed in partnership with SHOOK Research is available at www.forbes.com. Listing in this publication and/or award is not a guarantee of future investment success. This recognition should not be construed as an endorsement of the advisor by any client. No compensation was provided directly or indirectly by the recipient for participation or in connection with obtaining or using the third-party rating or award.

1 This recognition and the due–diligence process conducted are not indicative of the advisor's future performance. Your experience may vary. Winners are organized and ranked by state. Some states may have more advisors than others. You are encouraged to conduct your own research to determine if the advisor is right for you. 

2 Portfolio performance is not a criterion due to varying client objectives and lack of audited data. SHOOK does not receive a fee in exchange for rankings.