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  • Writer's pictureMilo F. Hanke, CFP

Stay Above the Fray in 2024

Look, no red ink— only positive results!

All major financial markets posted major gains in the last quarter — enough so to make 2023 a very good year for investors. The run-up continues into January.

In fact, all segments — stocks and bonds, both domestic and foreign — show positive numbers for the past one, five, and ten years.

Bonds have had their best quarter since 2001, and real estate bounced back. Despite the scourge of wars, foreign markets posted double-digit returns. The attached Market Review further details major financial markets.

Sour Mood Obscures Good News

Good economic news has been busting out all over. What’s not to like? Unemployment is hovering near a 70-year low; wages are growing; inflation continues to head downwards with interest rates poised to follow soon. The Dow Jones recently passed 38,000 for the first time.

Slowly Americans are embracing the good news. Yet many somehow believe the economy did better during the prior Administration. Quite possibly, the disconnect between fact and perception evidences hyper-partisanship as well as lingering pandemic trauma and inflation anxieties.

Conflating amorphous issues, folks are simply in a bad mood. In a case of displaced ennui, survey subjects are issuing harsh marks for the economy and the current Administration. We would all like a bit more certainty in our lives.

In an election year, further distortions appear as candidates draw attention to the country's problems and their campaigns amplify negative messages. At the same time, the investor and working classes, for example, will have different takes on the economy, especially at the grocery checkout stand where the sting of inflation is still felt. Furthermore, 42% of households are not invested, directly or indirectly, in the stock market, so they may not be as elated with market rallies.

Campaign politics and Washington machinations aside, shareholders continue to invest in companies that focus on serving customers and growing their businesses. That's a polite way of saying there’s always money to be made.

Short term, Congress can impact market returns as it did, positively, when passing a gargantuan infrastructure bill or, negatively, when failing to raise the debt ceiling. However, interest rate movements, geopolitical events, and technological breakthroughs play a far greater role.

How to invest in 2024

Despite wars raging and federal elections pending, our clients should stay above the fray in 2024. Stick with existing investment strategies and financial planning priorities.

This general advice draws from market history and is not meant to ignore horrific wartime suffering or the significance of the next election. No purpose, however, would be served by sidelining investment dollars or otherwise disrupting an “all-weather,” long-term strategy. Remain invested for the long term.

During these stressful times, please bypass the refrigerator, don’t throw slippers at the newscasts, and, if so moved, write checks to candidates and causes of your choice.

Who’s better for my portfolio - a Democrat or Republican?

Since the time of FDR, stocks have trended higher and pretty much equally under the control of either Democratic or Republican presidents: 11.2% under Democrats and 10.5% under Republicans (source: Capital Group).

During the same period, presidential election years have produced choppier market behavior, yet the investor who is patient may have good reason to remain so:

• During primary seasons, the stock market typically finishes flat or slightly negative for the five months, January through May.

• However, in the twelve months following primaries (June onward), the market has bounced back – gaining an average of 11.3%. Compare this to just 5.8% in similar periods of non-election years. (Future results will vary.)

Presidential wisdom

Given the frequent gaps between fact and fiction in our public discourse, we quote an American president from a long-ago era, John Adams:

"Facts are stubborn things; and whatever may be our wishes, our inclinations, or the dictates of our passion, they cannot alter the state of facts and evidence."

The fact of a robust economy is emerging within the minds of a moody public, thus nudging spirits towards grounded optimism in 2024, the Year of the Dragon. As detailed in a column by economist Paul Krugman, "Our Economy Isn't 'Goldilocks.' It's Better."

Annual disclosure and privacy notifications

We have enclosed a Disclosure Brochure that is filed with the regulators to reflect a few recent changes (page 2), including our move to new offices. After 25 years at our prior location, we are now up and running in an expanded suite of offices at 177 Post Street, near Union Square. Also, we enclose our firm’s annual privacy notice.

We welcome your questions, comments, and concerns about your investment and financial planning matters.

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