Winners and Losers – 2024 Halftime Review

Garrett Grigas CFA |

It’s been a mostly positive start to the year for investors, and we have had several major positive events in the beginning of 2024.  It’s time to look at who are the biggest winners and losers in the financial markets this year, as well as some news about us as well. If you want to skip ahead to the company updates it starts at page 4!

In the financial markets

Winners

The Stock Market

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Source: https://am.gs.com/en-us/advisors/insights/market-monitor/081624

 

The first half of the year has been great for the stock market, with every sector outside of real estate showing positive returns. Like last year, the tech and communication sectors continue to be the highest returning portions of the market. This might be a good time to use some of these stock market gains for spending or set aside to lock up income for later in the year.

The AI industry and Chipmakers

Some of the biggest investment winners of 2024 are companies connected to artificial intelligence. Both the providers of AI products and chip manufacturers have led the market in investment returns. This continues the trend of outperformance we saw in 2023, and so far the results have kept up with the AI hype. The Magnificent Seven, a grouping of largely AI related companies, was up 41% as of July 1st.

Gold

While not as flashy as AI stocks, gold has kept its luster this year. It shone with a 12.5% return at the halfway mark and is off to a bright start in the second half. Gold can play an important role as a diversifying asset in investment portfolios, and performance like this is a boon to investors who have gold in their portfolio.

Interest Rates for Savers

Interest rates have stayed high, despite many experts consistently predicting rate drops in the first half of the year. The top money markets are paying over 5% and many of the top banks are paying over 4%. It has been a good environment for savers who have been intentional with where they keep their cash. Where interest rates go is important to watch, because when rates do go lower, the interest paid on these accounts will quickly go lower too.

We have been helping a lot of our investors with cash planning strategies to try and best take advantage of the current rates. This is a great time to review your cash and how it is positioned.

 

 

Losers

Commercial Real Estate

Real estate has been the worst performing sector of the US stock market year to date. Although we haven’t seen housing prices drop in the Seattle area, rising interest rates, too much supply in the office space, and some deflating price bubbles have made it a difficult year for real estate investors. Office buildings especially have struggled, but most other real estate sectors have underperformed too.

Investing by Political Party

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Source: https://am.gs.com/en-us/advisors/insights/market-monitor/081624

 

Facing a very polarizing presidential election that is increasingly sensationalized by the media, it is easy to let political leanings bleed into our investing style. This research by Goldman Sachs illustrates the dangers of investing along party lines. Investors who got out of the market for one political party or the other saw major shortfalls over the last 70 years of investing. However difficult this election is, it is important to allow the markets to continue to work for our portfolios. It is clear that staying invested long term, no matter who is in office, has been the winning strategy by far.

 

Valuation Levels

A graph showing the growth of the stock market Description automatically generated

Source: https://fred.stlouisfed.org/tags/series?t=equity%3Bmarket+value

 

Stock valuations are a bit like wildfire risk. Although a hot and dry summer doesn’t guarantee there will be a wildfire, it does make the risk of one much higher. Like heat and dry conditions can lead to a fire, in the same way, the higher stock valuations go, the greater the risk of a market correction. Again, the higher valuation doesn’t mean there will be a correction, but the risk is elevated. The P/E valuation metric for the S&P 500 has been rising and is about 27 now, compared to the long-term average of about 16.

We can help combat this risk of ‘wildfire’ for our clients by rebalancing, making sure income plans are secure, having adequate cash reserves, and checking that portfolios are at proper risk levels. Your financial security is very important to us and if you would like to discuss your portfolio’s risk level please reach out and we can schedule a special review meeting.

 

At Gevers Wealth Management, LLC

Winners

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