Archive for January 4th, 2024
Are the “What if Monsters” keeping you up at night?
The truth is the state of the economy and market trends are cyclical and will always experience periods of highs and lows. Worrying about market crashes and what might happen next is a natural fear, but it shouldn’t keep you up at night. Even with highs and lows, history tells that those invested in the markets earn significantly more over the long term. A financial plan based on a sound, long-term investment strategy is the best way to ensure your financial future – and a better night’s sleep.
What to Expect This Year
This year, we see a financial landscape that is far less bleak than many had predicted. There will likely be a mild recession early in the year due to ongoing financial pressure, but this should only be mild due to several strong economic factors. The economy is already in a state of rebound as we see the sheer force of the U.S. economy’s forward momentum begin to counteract recent economic challenges.
The U.S. Economy Is Resilient
The first and most important factor is that the U.S. economy is still going strong. Despite the recent rise of inflation and the aggressive increase in the interest rate, the U.S. economy grew faster in Q2 of 2023 than it has since Q4 of 2021. The economy recently increased by 4.9%, which places us at the front of the Developed Market ratings. Also, we have been growing more rapidly since 2019 than any other G7 country.
Recent economic pressure may create a mild recession in early 2024, but this is no slowdown.
Strong Labor Market
The labor market is one of the strongest aspects of the U.S. economy. In the past 24 months, employers added 8.4 million jobs to the market. This was met with a record number of people joining the job market to fill the demand. We have reached 161 million known workers, with many more working as entrepreneurs and upholding the gig economy. This number rose from 158.5 million workers before COVID-19.
The push for better pay is also booming, seeing an average hourly earning increase of 4.4% in the last year. That increase is still outpacing inflation to help keep the cost of living within an affordable margin.
Both inflation and interest rates are finally stabilizing, so we can predict a more financially stable year for 2024. 2023 has been wild with inflation-curbing interest rate increases. We are starting to see a trend of disinflation, with a return to more affordable prices for energy, goods, and transportation costs.
As the interest rates stabilize, we should also see another surge in real estate. Buyers can increasingly make their decisions with greater confidence regarding the interest rate by the time a deal is ready to close.
Equity Market Gains
Despite the predictions that the stock market would experience a drop this year, we have seen the S&P 500 rise by 20% this year. This is almost double the annual historical average, serving as more proof that the equity market is stronger than ever. We are taking a particular look at the MAGMAN portfolio, which makes up over 75% of the returns of the S&P 500. MAGMAN (MSFT, APPL, GOOGL, META, AMZN, NVDA) has risen 69% in this year to date.
Income Is Resuming in Fixed Income Investments
There is a positive side to the increased interest rate, of course. Those who have invested in bonds are benefitting from the increased interest. This can provide an excellent source of income compared to other forms of investments. Bonds now offer a chance to lock in these high-level return rates.
Ensure You have a Long-Term Financial Plan
If you are ready to turn the current economic landscape to your advantage, working with a financial planner is the best way to gain both insights and opportunities and most importantly, a long-term financial plan.
Contact us today for your initial consultation and learn more about our financial planning expertise.
Already working with an advisor? Reach out and schedule an appointment for a second opinion regarding your current financial plan.
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