May 2024
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Stocks were up 10% in Q1, and Jeff and Meghan agree this optimism was mainly driven by the expectation of multiple rate cuts by the Federal Reserve. However, stock gains slightly declined in April due to rising inflation and subsequent talk of minimized rate cuts or even a potential hike in interest rates.
Despite earnings increasing modestly, stock prices have risen much faster, leading to higher market valuations. The price-to-earnings ratio on the S&P 500 is notably high, only to be surpassed by expensive valuations from the late 90s’ dot-com boom. International stocks are cheaper compared to U.S. stocks, potentially making them an attractive component of a diversified portfolio despite their lower growth prospects.
In recent years, bonds have had a bumpy ride given heightened inflation and rising interest rates. Looking forward to 2024, the bond market continues to face challenges as it is again posting negative returns because of higher interest rates. Our strategy involves focusing on short-term bonds that should offer moderate to high single-digit yields without taking on typical interest rate risks. In addition, private lending continues to be our highest conviction area.
Federal debt continues to accumulate, posing long-term fiscal challenges. Jeff and Meghan dissect our $34 trillion in federal debt to illustrate how challenging this issue will be to fix. Possible solutions include promoting economic growth, implementing austerity measures, raising taxes, and encouraging moderate inflation. However, each option comes with its own limitations and challenges.
In times of uncertainty, Jeff and Meghan emphasize the importance of balancing financial assets with real assets, like real estate and commodities, to hedge against inflation and other risks while seeking opportunities for growth in this higher interest rate environment.
Learn more about our approach to investing here.
Watch our previous quarterly updates from The Better Investor series below:
Symposium Recap & Q3 2023 Market Outlook
Disclosures: Information and references to specific investments presented herein are for illustrative purposes only and subject to change without notice. It is not intended as investment advice and should not be construed as an offer or solicitation with respect to the purchase of any security. Investment opportunities described may only be available to eligible clients and involve a higher degree of risk. Each investment opportunity is unique, and it is not known whether the same or similar type of opportunity will be available. Morton makes no representations as to the actual composition or performance of any security. All investments involve risk, including the loss of principal. Past performance is no guarantee of future results. There is no guarantee that the investment objective will be achieved. Morton Wealth makes no representation that the strategies described are suitable or appropriate for any person, and should not be assumed that Morton will make investment recommendations in the future that are consistent with the views expressed herein. You should consult with your financial advisor to thoroughly review all information before implementing any transactions and/or strategies concerning your finances.
