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07.5.2024 by Donovan Ingle

A Mid-Year Check-In and a Look Ahead

We are officially halfway through 2024 – a perfect time to reflect on what has happened in markets this year and preview what is ahead. 

A Strong Start For US Stocks 

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US indices are strongly positive to start the year (total return %): 

  • NASDAQ: +17.61% 
  • S&P 500: +14.48% 
  • Dow Jones*: +3.79% 
  • *The Dow Jones Industrial Average is a less diversified, more value-tilted, and less tech-heavy index. 

According to Goldman Sachs (via CNBC), this is the 21st-best start to a year for the S&P 500 since 1900. In the other 20 times, the index was up at least this much through June, the year-end total return was higher than its mid-year return 72% of the time for a median further gain of almost 9%.  

A Relatively Calm Ride 

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The CBOE Volatility Index, the VIX as it is commonly referred to, is a measure investors and traders use to measure the level of risk, fear, or stress in the market. The higher the VIX, the more investors expect volatility over the coming 30 days. When the VIX is under 15, we are generally considered to be in a low-volatility market, and this usually indicates optimism in the market. As you can see, outside of some turbulence in April, we have spent the majority of the year under this threshold, and US markets have steadily risen in the process. 

International & US Small Cap Struggle To Keep Up 

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This is a trend that diversified investors have become pretty familiar with over the past decade or so. Large US companies, led this year by Nvidia and other large tech companies, have continued to outperform their International (represented in yellow) and US small-cap (represented in orange) counterparts. 

So, what does the second half have in store for us? 

The US economy and financial markets appear to be on strong footing, but investors will be paying close attention to a few major events over the next six months: 

  • 2024 Presidential Election – As we wrote earlier this year (RSWA Financial Advisor Insights – Election Years Impact on Markets), major US elections are generally not a bad thing for investment returns. However, historically they bring higher volatility as election day draws nearer, so don’t be surprised if we see that VIX start to creep up. 
  • Federal Reserve Rate Cuts – Will they or won’t they? This week, Fed Chair Jerome Powell expressed satisfaction with the progress that has been made in bringing down inflation. CNBC The question that remains is when will they start lowering interest rates and will it be before year-end? 
  • Surprises – while identifying and understanding potential risks are helpful, often the biggest risks are those nobody anticipates. black swan events 

Play Ball! Join RSWA at a Sea Dogs Game! What is better than a summer night at the ball field? A summer night at the ball field with your favorite financial advisors! RSWA is hosting a night at Hadlock Field to watch the Portland Sea Dogs take on the Altoona Curve on August 7th. First pitch is at 6 pm. Formal invites will be coming your way shortly. We hope to see you there! 

Financial Planning/Investment Strategy Corner

Benefits of Rebalancing Your Portfolio: Clients of RSWA are pretty used to our rebalancing cadence and portfolio management – annual rebalance in January, a minor “tune-up” in July, and keeping the portfolio within 5% of its targeted allocation mix. But why do we do this? There are two key benefits of rebalancing portfolios – mitigating risk & maximizing long-term results. Morningstar Schwab 

Mitigating risk – This is the most important benefit of rebalancing. Since different investments involve different risk and return profiles, each investment’s respective weighting in a portfolio will fluctuate over time. For example, riskier asset classes such as stocks tend to go up in value faster than lower-risk assets such as bonds. Over time, as stocks go up in value, they will make up more and more of a portfolio. That increasingly raises the portfolio's level of risk, with more downside potential when markets become volatile. By periodically adjusting the portfolio back to its original or updated allocation targets, investors can mitigate the risk of overexposure to certain asset classes that may have become disproportionately larger than originally targeted. 

Maximizing long-term results – More of a byproduct of risk mitigation, rebalancing can lead to better long-term results for investors, both maximizing returns and helping them reach their financial goals. As a portfolio is rebalanced, you are likely selling the investments that have increased in value the most and buying those that haven’t performed as well. Essentially, you are selling high and buying low. This works in both good and bad market environments for stocks. In a bull market, you are taking profits along the way and moving the profit to less volatile assets. In a bear market, you can use your built up less volatile assets to put into stocks that are lower in value from where you sold them.  

Quick Hits:  

  • Fun fact – An estimated 150 million hot dogs were consumed in yesterday's Fourth of July festivities Food & Wine 
  • An even more fun fact – There is a whole Council dedicated to hot dog and sausage consumption and their URL is great 

Quote: “It’s Fourth of July weekend, or as I call it, exploding Christmas.” — Stephen Colbert 

Thank you for reading RSWA Financial Advisor Insights! We welcome feedback, and please forward this to a friend! Be well, take care, and stay safe! 


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