Over the last two months, the CFP's of Impel Wealth Management, in conjunction with our partners from the Horizon Advisor Network’s Investylitics committee and our portfolio analytics associates at both the Blackrock and PIMCO funds, have been reviewing our model portfolios. We wanted to be confident that our portfolios were aligned with the investment and economic outlook as we navigate the new presidential and congressional landscape this year.
The economy appears to be continuing on a relatively strong pathway. Real GDP increased 2.8% in 2024, compared with an increase of 2.9% 2023. The increase in real GDP in 2024 reflected increases in consumer spending, investment, government spending, and exports. Initial readings for the fourth quarter of 2024 have shown corporate earnings growing at their fastest rate in more than a year and exceeding expectations so far. Inflation continues to stabilize above the Federal Reserve banks 2% target level, which has left many Wall Street analysts and economists believing that the Fed will continue to be cautious with additional interest rate cuts.
As a result, we have substituted several funds in each of our model portfolios. We have done this with an eye toward adding more quality exposure to our portfolios through companies with a history of durable earnings and cash flow. We have also rebalanced our portfolios between growth and value stocks while maintaining a slight bias towards value and dividend stocks that we believe are undervalued and represent a good risk/reward profile.
We have also adjusted a couple of the bond funds on the fixed income portion of our portfolios to better reflect the economic outlook outlined in the second paragraph above. With a relatively strong economy and the Fed telling us that they are not looking to aggressively cut interest rates, we have slightly reduced maturities within our portfolios, slightly favoring credit risk over duration risk at the present time in our bond funds.
You will likely be seeing trade confirmations in your accounts, and we wanted you to know why you are receiving these. For our clients who are actively taking income or required minimum distributions from their portfolios and have previously set aside funds in money market or short-term bonds to help manage liquidity and income in your portfolios, these positions have been maintained as we rebalanced the portfolios.
During this process, we were able to select several funds with lower costs, and thereby, reduce the overall internal expenses of our portfolios as well. Our investment committee continues to actively work to help manage and grow the assets you have entrusted to our care. We appreciate your trust in our process, and as always, please feel free to reach out if you have additional questions about your specific financial situation.
The views stated in this piece are not necessarily the opinion of Cetera Advisors LLC and should not be construed directly or indirectly as an offer to buy or sell any securities. Due to volatility within the markets, 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.
A diversified portfolio does not assure a profit or protect against loss in a declining market
Re-balancing may be a taxable event. Before you take any specific action be sure to consult with your tax professional.
