C'mon May, let's Bloom!

C'mon May, let's Bloom!

May 01, 2024

April sure was a wild ride.  We got a pullback of about 5% in the S&P500 during the middle of the month.  The aggregate bond market was also down about 2% from March.  At the very least, the S&P500 tried to claw back some gains over the last week.

There is still quite a bit of optimism in the market from a few analysts.  That being said, where is all this volatility coming from?  If you guessed the Fed Rate cut readings, then you would probably be correct.  Inflation data came in hotter than expected, and the markets are worried that we won’t get the three rate cuts any longer.  In fact one of the Fed presidents said there might not be any rate cuts!  If I were to guess, this surprised the markets the most.

Without rate cuts, the bond markets will have a difficult time jumping higher considering how fast they fell.  This is probably the most disappointing aspect for those investors that are Conservative or Moderately Conservative.  Those Investment Objectives have historically weighted to the bond market.

Does that mean we should suddenly change the risk tolerance we’ve become comfortable with over the years?  No, not necessarily.  We don’t want to constantly update our risk tolerance because then we’re trying to time the markets a bit too much.  If you recall back in February, we reviewed some market timing scenarios and its effect on portfolios.  Aside from that, I’m extremely optimistic that, when the Fed starts cutting rates, then we will see a good upside in the bond markets.

Considering the S&P500 2022’s big downside then 2023’s big comeback, especially with the good run we saw from 2017 to 2021, I’m okay with what we’re seeing for volatility.  The markets are trying to decide if 2023 was up too high too fast.  Always keep in mind that your investment timeframe is usually much longer than you originally think it is.  Even someone in their 70’s could have a timeframe of more than 20 more years!  These days will hopefully all be blips on a chart in just a few years.

Thank you for your continued support and trust in our firm!  We couldn’t ask for a better group of clients.  Also, a big Happy Mother's Day to moms we couldn't live without!

Larry Mroczkowski

President

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.

The economic forecasts set forth in this material may not develop as predicted and there can be no guarantee that strategies promoted will be successful. All investing involves risks, including the loss of principal.