Perspective of the Markets From the First Half of 2024, and a Look Ahead

In this episode of Capital Conversations, CFO and Founder Brian Pultman and portfolio manager Ryan Potts take a look back at the first half of the year, followed by a look ahead as a gauge for clients’ financial planning. With an election cycle coming up Correct Capital wants to make sure you are aware of potential impacts to your portfolio, as well as how to best position cash and assets to best align with your financial goals.

For recent investment news and our take on the current market, retirement planning, and investment, listen to our podcast Capital Conversations or view our recent blog posts.

Below is the transcript for our most recent podcast, "Perspective of the Markets From the First Half of 2024, and a Look Ahead."

---

---

Brian Pultman: Good afternoon, it is Brian Pultman here with Correct Capital Wealth Management broadcasting live, we’re actually taped, from the world headquarters majestically located here in Clayton. I’m honored to have our portfolio manager Ryan Potts here to my right, to your left, to kind of give a perspective of the markets from the first half of the year and taking a look at what we expect going forward. Ryan, welcome to the show.”

Ryan Potts: Thank you, Brian. I appreciate it. There’s a lot more wisdom in the room now that Colin’s no longer here…

Brian Pultman: Exactly. Colin is out on personal time off… well deserved. So I have a lot of stress to fill his position. Let’s continue on.

Ryan Potts: Absolutely. As Brian had alluded to, let’s really quickly recap the first half of 2024. I think that the narratives that kind of went through 2023, and really into the back half of last year, have continued forward into the first half of ‘24. A lot of that being around the AI names in the stock market, a lot of concentration amongst the ‘Magnificent Seven’ at the top of the S&P 500, and a lot of optimism just around the overall economy environment, the Fed looking to make cuts at the second half of the year, and a couple of others things that the market has just been optimistic about. All that kind of thrown together, you’ve got the NASDAQ doing 18.6 percent the first half of 2024, which is just a stellar first half. I think that, going forward, that story might not be the same for the second half of ‘24 and maybe into ‘25 as well, so there’s some interesting talking points there, for sure.

Brian Pultman: So, what are you saying? You think of a bit of a more rocky road between now and year end?

Ryan Potts: Yes, I think if you look at especially the beginning of ‘24 to June 30, it seemed like a pretty straight shot up and to the right, if you pull up a chart of the markets. We had a little bit of volatility back in April, if you remember, kind of interest rates and expectations were being changed. But, I think going forward from here, there’s a lot of optimism already baked in. So, you’ve got the election, you’ve got the Fed needing to make a cut, you’ve got valuations inflated… a lot of things that maybe could poke some holes in this optimist story that the market’s trying to play right now. I think also from your experience being in the market longer than I have… it’s an election year. Typically, we see more volatility through really March, April, May, and then sometimes into summer, and we haven’t seen much of that this year, so there’s almost some anticipation from my regards into what volatility might be leading up to that Nov. 9 date.

Brian Pultman: Understood. So, with normal volatility in the historical stock markets, we can expect at least a 10 percent correction, on average, three times a year. So, for the most part, with the market jumping up as much as it has if the year ended today, we’d all be pretty damn happy with where we’re at. But reality going forward, with all the different news and noise that’s out there today, somewhat of a pull-back can be expected. But, we make sure that our clients are well diversified by having a cash allocation, a nice income portfolio, and long-term growth. We know that at some time that growth portfolio will pull back and the idea there is to be patient, make sure you have enough cash and income to get you through those lulls.

Ryan Potts: We love the bucket strategy here. We implement it with a lot of our clients. Cash has been a big talking point, too, the last couple of years. I know we just had a meeting last week around cash. I mean, you tell me, what are some of your clients’ feelings towards cash right now. I know with money markets yielding almost 5 percent, it’s probably an exciting time to have cash sitting on the sidelines. But I know that might now resonate with the story we’re telling our clients. Any perspectives around that and how we’re handling cash?

Brian Pultman: Yes. Always maintain a good allocation of cash, maybe 3, 6 months of cash allocation. But also, focus on the fact, as Ryan just mentioned, the Fed has made it clear that they hope to start lowering rates going forward. And now is an ideal time, if you are sitting on some cash that’s taxable, maybe earning 4 or 5 percent somewhere, perhaps consider tax-free exempt municipal bonds. Because that way we can add them to our current ladders or establish a new account on your behalf, to lock in 2, 4, 6, 8, 10 years out of high rates, so that you can enjoy those high rates for years to come. As the rates go down, we can lock in. One, you’ll get the nice income. But two, capital appreciation. As rates go down, the value of the bonds will go up. So, right now, we’re encouraging people to allocate cash more to municipals. Also, as you talked earlier, equity income, dividend stocks, still a good place to be. Even if the market pulls back, dividend stocks seem to be much more resilient, historically, against pull-backs in the market.

Ryan Potts: I think to add on to that, not to get into the weeds or anything at all. But, if you sit here and look at some of the things I’ve highlighted in our mid-year market commentary, all of our clients should be getting this via email. We talk a lot about earnings projections, and kind of what the expectations are for the market in terms of how profitable are the S&P 500 companies and where’s all the profits being generated from? Really, the last four quarters, it’s all come from the ‘Mag Seven.’ And if you look at performance from the last four quarters, it’s all coming from the ‘Mag Seven.’ As we look and note in the writing, hopefully you guys have access to this as well, come fourth quarter of this year, the expectation is that the ‘Mag Seven’ and the rest of the S&P 500 constituents are all growing at exactly the same pace in terms of earnings. I bring that up because you mention these dividend stocks that we own. It’s not concentrated in the ‘Mag Seven,’ it owns a lot less names that are in the S&P 500, from the top-down perspective. But we own names that could maybe benefit from the fact that their earnings are looking to accelerate, where you have the ‘Mag Seven’ actually declining going into the second half of this year.

Brian Pultman: Well stated.

Ryan Potts: I think fixed income is another interesting comment. Like I said, we have a lot of wisdom in the room. So, your perspective… I love fixed income right now, I think we do as a firm, as well, and we’ve been talking to our clients about building their fixed income allocation. I mean, take us back 5 years ago, really even 3 years ago, you couldn’t get nothing out of fixed income. Money markets were paying less than half-a-percent and your corporate governments were paying somewhere in the 2 to 3 percent range. Now we’re looking at 5, 6, 7 percent as we alluded to earlier. Do you feel like fixed income has become an attractive asset class for our clients to take a look at, beyond just the muni bonds that we’ve talked about already?

Brian Pultman: Absolutely. Depending on your tax situation or the type of account. Corporate bonds, also. We have solutions in both taxable and tax-exempt. If you can earn 5 percent taxable, for some people that’s a huge home run. Maybe 4, 4.5 percent tax-exempt, that’s a tax equivalent possible 6, 7 percent. That’s a nice place to be with minimum to low risk.

Ryan Potts: I remember just a couple of years ago you’d have to take a ton of risk to get those kinds of returns, so it’s definitely a different market environment that we’re playing in today.

Brian Pultman: Exactly. The key thing as we look at the second half of the year though, always kind of look at what kind of cash needs you may have. And if there’s a situation where you need to raise some money, with the market hitting new highs at this moment, please give us a call and let’s maybe look at allocating some of that cash on the sidelines perhaps to make sure that we don’t miss out or have to sell at a time when the market’s against us.

Ryan Potts: Absolutely. Anything else, in terms of what we should maybe bring up to our clients about the second half of this year? Or maybe looking forward even farther, maybe into ‘25?

Brian Pultman: Well, historically when it comes to an election year, for the most part, it’s never really mattered which party or which individual was in the race to win or lose, perhaps. But, this year, there’s a lot more at stake. Not just as far as which party or the candidate, but also a lot of different policies that are out there today. So that we anticipate the markets will be a little bit more volatile going forward, and that’s why we continue to stress goal-based planning and making sure your portfolios are well diversified. And, if there are goals in the next 3 to 6 months, call us, let’s get that cash on the sidelines and let’s take care of any debt or obligations you have going forward.

Ryan Potts: Awesome. I think in short we can summarize the conversation today: The first half of the year has gone exceptionally well. We’re probably expecting some more volatility to move into the second half of ‘24 as we near the election cycle. Maybe looking at diversifying outside of these ‘Mag Seven’ names that everyone’s becoming accustomed to owning are going to be beneficial to the portfolios. And then also looking at opportunities outside of cash – looking at municipal bonds if your income puts you in a higher tax bracket. Or maybe it’s corporate bonds in a qualified account. I think other than that, always making sure that we’re aligning the portfolios with the goals of our clients and having those bucket strategies – cash, income, growth – I think that you put all those things together and we have a recipe for success going forward.

Brian Pultman: Exactly. Thank you very much, Ryan. Appreciate it, and I appreciate all of you as well. Remember, any questions, concerns you have, always feel free to call Correct Capital Wealth Management. We’re here to serve. Thank you very much.

The opinions expressed in this program are for general informational purposes only and are not intended to provide specific advice or recommendations for any individual or on any specific security. It is only intended to provide education about the financial industry. To determine which investments may be appropriate for you, consult your financial advisor prior to investing.

As always, please remember investing involves risk and possible loss of principal capital. Please seek advice from a licensed professional. Correct Capital Wealth Management is a registered investment advisor. Advisory services are only offered.

Capital Conversations | Correct Capital Wealth Management

Correct Capital Wealth Management is the firm to turn to for independent, objective, and unbiased investment strategies. As financial advisors, Correct Capital helps individuals and families who don’t have the time, interest, or knowledge to handle their own investments grow their wealth and realize their financial dreams. Whether you’re looking for investment management or full-scale financial planning, you can schedule a meeting with a member of our advisor team, contact us online, or give us a call at 877-930-401(k). It only takes 15 minutes to understand if we’re a good fit.