2024 Q1 Market Commentary

My process for writing this commentary varies a little from quarter to quarter, but overall it remains consistent. During the quarter, I note what might make a good theme for the upcoming report, I map an outline in my head, and lastly, I put pen to paper. This process generally works. At least, it did until this quarter. On the weekend during which I planned to write, Iran fired some 300 missiles and drones at Israel, a country the United States has vowed to defend, in retaliation for an alleged Israeli strike in Syria which killed an Iranian official.

Fighting has occurred in that region of the world for thousands of years, and it is wishful thinking to believe that would change now. I cannot offer any great insights into the relationships between countries in the Middle East. However, I can say the conflict poses a direct threat to oil prices and may lead to greater economic fallout. If nothing else, it will likely increase the volatility in the markets.

Throughout the first quarter of 2024, the stock market shrugged off Middle East concerns, the ongoing war between Russia and Ukraine, and a looming presidential election, managing to post positive results with the S&P 500^[1] up over 10%. Small-cap stocks and international stocks did not do quite as well but were still positive. As of writing this commentary in mid-April, we have seen a pullback since the end of the quarter. It is impossible to know how much of this pullback is due to the aforementioned issues versus the interest rate environment.

Interest rates remain a hot topic. Recently, volatility increased around the release of the CPI (Consumer Price Index) Report. This is the report commonly referenced during discussions of the latest inflation number. The March reading was higher than expected, meaning the rate at which prices of goods and services increased was higher than expected.^[2] (To put it plainly, when the report says that inflation is going down, prices are not going down; rather, the rate at which they increase is slowing.) Markets are reacting because stocks generally perform well when interest rates are steady or going down. In addition, fixed-income investments can see capital appreciation as interest rates decrease, even though this leads to lower interest income in the future.

At the end of 2023, the consensus was the Federal Reserve (“the Fed”) would begin cutting rates in early 2024 and follow with four or five rate cuts. As we sit here in April, there have been zero rate cuts, and there seems to be no consensus on how many (if any) we might get. Fed chairman Jerome Powell has repeatedly said he will be data-dependent and will not lower rates until inflation is moving down towards 2%. Until that happens, we can expect to see a bumpy ride for the markets.

So, what is an investor to do in times like these? As the late Charlie Munger, right-hand man to Warren Buffett, said, “The big money is not in the buying and selling but in the waiting.” This quote really rings true to me right now. Just because you have excess cash you want to invest does not mean you must invest it all today – especially when you can earn 5% on money markets. After the positive returns of 2023 and Q1 2024, we would not be surprised to see a market pullback. With all the uncertainties in the world right now, the market feels irrationally high, but the market can act irrationally for a long time.

Please don’t take this to mean we feel you should not be currently invested. We continue to believe any monies you do not need in the next five years should be invested for long-term growth based on your financial goals and your risk tolerance. How you determine this amount should be done through careful and comprehensive financial planning.

Once again, I am nearing the end of this commentary and feel it is too somber in nature. Not all is bad in the economy, the markets, or in life. Here are some highlights to end on a more uplifting note:

• The U.S. economy is still humming along, which is one reason we are not as optimistic about rate cuts as others.
• Stock markets are up year-to-date.
• The United States is still full of great, innovative companies that are the envy of the world and will continue to grow in value.
• Pollen season is almost over, and we have a great month or two of weather (in Atlanta, at least) to enjoy outdoors before the heat of summer arrives.
• Baseball season has just started, and personally, I can’t wait to go see the Atlanta Braves play.
• Travel is one of my passions, and my wife and I love sharing those experiences with our kids.

I realize the last three have little to do with the markets or the economy, but so much of the news is negative and I do not want to fall into that trap. Your last three highlights may be completely different, but I urge you to take some time today and appreciate something positive, big or small.

As always, please reach out with any questions you may have.

– Will Bowen

The views and opinions expressed are of Persium Advisors, LLC. This commentary is provided for educational purposes only and should not be construed as investment advice. Persium Advisors is an investment advisor firm located in Atlanta, GA.