Broker Check

March 2024 Investylitics


Horizon Advisor Network Investment Committee March 4, 2024

Executive Summary

  • Markets continued their upward march during the month of February as corporate earnings managed to jump over the lower bar that had been set by Wall Street analysts. However, top-line revenue growth did not keep pace with bottom-line profits.
  • There is continued hope that the rapid adoption of artificial intelligence will allow companies to be more productive in an economy with fewer workers. This should lead to greater profitability over time.
  • Economic reports were mixed over the month, with job creation and personal income exceeding expectations, inflation continuing its slow descent in line with expectations, and retail sales falling for the third time in four months.
  • Economies and corporate leadership evolve over time. Below, we will explore how this phenomenon has changed over the last four decades.
  • With markets near all-time highs, it is always a good idea to rebalance your portfolios in order to sell high and buy low. It is also a good time to raise cash for any liquidity needs you will have over the next 12 months.

The members of the Horizon Advisor Network Investylitics Committee met on the afternoon of Monday, March 4th. As markets continue their upward march during the month of February, we were happy to have the opportunity to review and share perspectives from the economists and market strategists we follow.

Corporate earnings and hopes for lower interest rates continued to drive markets higher over the last month. More than 80% of companies in the S&P 500 exceeded earnings expectations for the fourth quarter. We know that earnings expectations had been ratcheted down heading into the reporting season. At the same time, far fewer companies topped their revenue projections. This means that companies created higher profits by managing the expense side of their businesses. We know that this cannot drive earnings higher over long periods of time.

Tech and AI companies have largely exceeded earnings expectations and provided strong forward guidance for the future growth of their companies. However, we expect that companies in other industries who rapidly adopt artificial intelligence to be the drivers of future productivity and efficiency in the overall economy. As you can see, in our first chart below, which is provided by Bain and Company, there is an expectation that a wide range of industries can and will benefit from reduced labor costs and time saved as they implement generative AI.

Source: Bain & Company

The economy continued to show mixed results over the last month. The unemployment rate remained low, and companies created far more jobs than were expected according to the labor department. Personal income also jumped unexpectedly, although, this tends to happen in January, when retirees get their Social Security cost-of-living adjustments.

Inflation continues to slowly trend down. After falling from 9.1% in June ‘22 to 3.0% in June ‘23, both the CPI and the PCE are showing that the last leg down towards the Fed’s target of 2% inflation may be more difficult than the initial decline. We also saw retail sales fall for the third time in four months. This may indicate that overextended consumers, especially at the lower end of the income range, are running out of cash and are seeing their credit card balances continue to grow. All this comes as credit card interest rates are near record highs.

The committee wanted to remind you that economies and corporate leadership evolve overtime. If we look back to 1980, we will note that 7 of the 10 largest and most valuable companies in the US stock market were related to the oil industry.

By calendar year 2000, only 2 companies from 20 years earlier were still on the list, and only 1 of these was related to the oil industry. Flash forward to today, and only one company from 2000 remains on the list. Today’s top 10 list is driven by tech and AI driven companies, one of which nobody had heard of just a few years ago.

Source: ETFDB.com and assetdash.com

It’s important to remember that stock prices are driven by corporate profits. In turn, corporate profits are driven by consumer demand and innovation in a free market, capitalistic society. Regardless of what we think will be the biggest and most profitable companies and industries 20 years from now, there will likely be products and technologies that are created that we can’t envision or imagine today. These will continue to drive corporate profits, and therefore, stock prices in the future.

Finally, with markets near all-time highs, the committee would like to remind you that it is a good idea to rebalance your portfolio in order to sell high and buy low. It is also a good time to raise cash for any liquidity needs you will have over the next 12 months or so.

The committee continues to carefully watch and monitor our model portfolios, the economy, and the markets. We stand ready to make adjustments if and when necessary to help you, our trusted friends and clients. Please reach out to your advisor if you have any questions about your unique situation, we are here for you.

© 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.