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PFP - February 2024 Newsletter

Thank You

This is our first client letter of the year, and we are grateful to be able to serve you in 2024. Our hope is that we get to be a part in helping your families thrive. We have a few housekeeping notes below for your review along with market commentary and links to helpful market literature.


  • Requesting Funds. We kindly request all requests for distribution of funds from client accounts be directed to the office by calling the main client service line of 770-825-0248. One of our client service associates will be happy to assist. We are not allowed to act on emails or text messages. The reason for this is to ensure the requests are genuine and legitimate.
  • Tax Document Timing. Tax documents have started going out. However, there is a high likelihood from what we are seeing that Fidelity and Pershing 1099’s could be delayed into late February. We encourage those of you who are set up online at Fidelity to log in and check the “Documents” section for tax forms. Should you need assistance with tax documents, please email the request to your advisor and we will be happy to assist. 
  • We have one additional reminder specific to clients that have K-1 investments. This won’t apply to many of you that only have 1099’s. As usual, K-1 tax documents typically are not delivered until near the tax deadline in April. Given the tight turnaround for filing, we recommend you work with your tax professional to determine (1) if you want to file an extension and (2) make any required estimated tax payments.
  • 2023 Fidelity Transition Clients Only. This note is specific to clients that moved their accounts to Fidelity in 2023. For clients that had accounts moved around in 2023, please make sure you have all the 1099’s that are needed for your taxes. If you have any questions on this, please reach out to our office to verify. 


Market Commentary

It is forecast that 2024 will bring an event the world has not seen since Thomas Jefferson was President of the US. Broods 13 and 19 of cicada will hatch at the same time, likely beginning this April. This will bring trillions of cicadas to the Midwest and Southeast. Illinois and Indiana stand to be the two states most likely to have both broods flying around. So, get ready for a noisy spring and summer. Cicada are not harmful to humans, they are just annoying and noisy…

Fortunately, we are used to a lot of distracting noise and annoyances. There has been no shortage of them. Geopolitical events such as wars, an upcoming election, a bank crisis in early 2023, high interest rates, the prediction of a recession that just doesn’t seem to want to come, etc. This is all noise, noise that most would conclude is poor for stocks. However, the stock market and the economy have just trudged through it in 2023 to produce results better than nearly every expert economist was calling to happen. 

One part of our job that we cherish is the opportunity and necessity to keep learning. We learn so much every year from the experiences and reactions we observe while studying the economy and financial markets. The last several years have been testimony to how difficult it is to predict the short-term direction of financial markets. Our key learning is that it is important to understand how to allocate for different environments and to always have a posture ready to address positive and negative markets.

This has paid off as we made it through 2022, which was a down year for nearly every financial market or index. We used risk mitigating strategies to help keep investors comfortable enough to stick with their plan. As usual, investors were rewarded for doing just that after a tough year with a strong rebound in 2023. 


Investors are betting on interest rate cuts in 2024 along with continued strong employment. A few important data points to keep in mind:

  1. Fed Rate Cut. The Fed historically has not cut interest rates when we have unemployment lower than 4%. We have been below 4% for 24 consecutive months. Consequently, interest rates sit at a 23 year high. The Fed’s recent language leads one to believe that rate cuts may not happen as early as the market is pricing and investors are hoping for. In addition, the recent inflation data remains slightly higher than expected. Lastly, the GDP data that was reported last month was much stronger than expected as well, indicating the economy is strong. The US consumer has held up much better than nearly any of the Federal Reserve chairs predicted.
  2. Election Year Impact. This is an election year and important to consider than since 1940, we have only had 2 election years where the S&P 500 failed to produce a positive return. This doesn’t mean we cannot have volatility and pull backs in the stocks market midway through the year. It simply means that by the end of the year, the probability is higher than normal of a positive return in the S&P 500 index. 
  3. Interest Rate Hikes & Recessions. It is well understood by economic professionals that the effects of higher interest rates and tighter money supply can be delayed several months or even years. Examining the last 12 financial cycles one will see that interest rate hikes eventually led to a recession in 9 of the 12 cycles. In the other 3 cycles, a recession was avoided, until the next cycle of course. The average time frame for recession after interest rate hikes is typically about 2 years from the first hike. The first hike was March 2022, so that puts us close to the two years right now. The truth is that nobody knows for sure if a recession will come in 2024 or 2025. The only thing we know is that eventually one will come, and it is hard to predict. Our strategy continues to be: Invest wisely, proactively plan, and prepare to be nimble. 
  4. Consumer Debt Trends. Consumer debt is on the rise again which indicates consumers are living above their relative wages. The Federal Reserve Bank of New York reported that total U.S. household debt stood at $17.50 trillion at the end of Q4'23, representing an increase of $212 billion over Q3'23, according to its own release. Mortgage debt rose by $112 billion over the period to $12.25 trillion. Balances on home equity lines of credit rose by $11 billion in Q4'23, marking their seventh consecutive quarterly increase. Debt balances for auto loans and credit cards rose by $12 billion and $50 billion to $1.61 trillion and $1.13 trillion, respectively.
  5. Wall Street Predictions. In a Bloomberg survey of 22 Wall Street strategists taken in late December 2022, the average forecast for the 2023 year-end value of the S&P 500 Index was 4,078, implying just a 6.2% rebound in the large cap index in 2023. In summary, they were way off. So why do we care about what they say for 2024? We probably shouldn’t, but it’s still interesting to see what the survey results were for 2024’s outcome. A Bloomberg survey of 19 equity strategists on 12/19/2023 found that their average 2024 year-end price target for the S&P 500 Index was 4,833, according to its own release. The highest and lowest estimates were 5,200 and 4,200, respectively. The S&P 500 currently is nearing the 5,000 mark which is already 2% or so higher than the average year end target. 
  6. S&P Concentration. The top 10 largest companies in the S&P 500 now make up 32% of the overall index. So, the other 490 companies in the index make up 68%. This is the highest concentration we have seen since 1987. It is unclear what this means and if it means anything at all. It does however force equity strategists and managers to ponder how to keep investors diversified appropriately. 

 Helpful Literature 

The Wall Street Journal published an article on January 2nd titled Investors’ Hope for 2024: A Return to Long-Lost Normalcy. The title implies that markets have a definition of what normal is. However, it appears to us that normal for the markets is defined by abnormalities and uncertainty. The media sensationalizes things so much these days and we all have so much information at our fingertips. It is not unusual for the financial markets to be volatile. To help illustrate this, we are including a graph below with a sample of world events since 1970. 

Markets are uncertain and react to future events and actions that mortals have no way of predicting. We see some tremendous opportunities in the markets these days, and we see other areas that concern us. That indeed is “normal”. Taking advantage of higher interest rates to earn more on Bucket 1 Safe Assets has been a great opportunity. Allowing the Bucket 3 Risk Assets to capture upside with a long-term mind set has been a key result of managing risk appropriately and individually for each client. Bucket X has presented some unique opportunities producing an appropriate blend of reward and protection for many clients. 

The market overall appears to be higher in valuation than usual and is pricing in lower interest rates and strong earnings growth for 2024. This earnings growth in large part is thought to be fueled by the consumer. Again, nobody knows for sure whether the markets are pricing in the right outcome. We are carefully monitoring the data as it comes in. We recommend taking an optimistic view, and being a bit skeptical that the outcomes will continue to exceed expectations and produce results like we have seen since the market lows back in October 2022. 

Page 5 of this PDF is a chart that shows the S&P 500 averaged 10.68% per year since 1970. As you can see from the illustration, it does not do it in a straight line. Investors must deal with some bad returns to get the good returns. The good news is that we have been through many recessions and have marched on to new market highs after each one. We continue to encourage all clients and investors to communicate and be honest with themselves about what level of risk they are comfortable with. In addition, we will continue to focus on strategic proactive planning, to ensure one is not relying on short-term market trends to provide for near-term essential expenses. 

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