President Trump's return to the White House will bring both familiar considerations and new challenges. His views on trade, regulation, and geopolitics are well-established, but the economic landscape has shifted significantly since his first administration.
For many people, the stakes could not be higher, and the idea of the “other party” winning represents an existential threat to our democracy. But Mr. Market has proven time and again that he is bipartisan, that it’s the economy that matters, not political rhetoric. And as much criticism as the Federal Reserve has received, they have managed to bring inflation under control over the past few years and guide the economy to an apparent soft landing. Based on current levels of GDP growth and unemployment, markets appear to be on relatively solid ground.
Those familiar with financial modeling have likely encountered the personal financial statement. Unlike mere snapshots of a portfolio of securities, it captures a broader spectrum of assets, including real estate and other valuables. This comprehensive approach ensures a thorough understanding of one's financial standing and facilitates informed decision-making.
The fourth quarter posted strong performance results across the securities markets with stocks and bonds rising together on news that the Fed was done raising rates.
One unique aspect of the current economic cycle is the post-pandemic mindset toward spending. A behavioral observation, and one that gets far less press than the headlines of political upheaval, bank runs or the price of gasoline is the phenomenon called “retail therapy.” After experiencing loss of loved ones or feeling isolated and alone or having a near-death experience, there is a propensity to spend or enjoy or splurge a bit. You may have also heard it called “revenge vacationing” or “grief shopping.” In the time since Covid-19pandemic, spending on trips and luxury items and other goods has been a coping mechanism, a way to make up for lost time (in lock downs) and a way to take back some control.
It has been 16 months since the stock market peaked and 13 months since the first rate hike by the Federal Reserve. The S&P 500's most recent low came in October 2022, down approximately 27% from the peak. The Fed continues to raise rates in their fight against inflation, and stocks have shrugged off several events, including a bank run, and have staged a partial rally over the last six months. While no one can know with certainty whether the October low will prove to be the bottom of this market cycle, there are a few things that we can know with a high level of conviction.