Wednesday Reading List

January 10, 2024

2024 Market Outlook by Heritage Financial

Our team’s 2024 outlook contains a ten-year return forecast for all asset classes and the year over year change to those numbers from last year. The team sees stronger future returns for bonds and real assets, inflation being range bound but above the Fed’s 2% target, and stocks struggling to replicate the last decade of returns due to valuations but new leadership emerging outside of the so-called Magnificent 7.

Mixed Signals: December’s Jobs Report by Charles Schwab Asset Management

The labor market is sending mixed signals about the likelihood of a recession and rate cuts this year. Headline payroll growth was strong but some underlying data was weaker. The market may be too optimistic in expecting March rate cuts, although cuts in 2024 are still expected.

The stock market will often fall on its way up by TKer

Stocks are off to a sluggish start in 2024, but this piece does an excellent job putting stock returns into context. In the average year, the S&P 500 dips 3% at least seven times, 5% three times, and 10% once. The average annual drawdown is 14%. Finally, in case you were concerned that this year has to be bad because last year was so great, Sam shares a chart showing that good years more often than not follow great ones.

The Best 529 Plans for 2024 by Morningstar

“A 529 education savings plan is a type of investment vehicle that is tax-advantaged. Your money grows tax-free, and if you use that money to fund certain qualified education expenses like tuition and books, then you don’t get taxed on the capital gains.” According to Morningstar, the two best are the Utah and Pennsylvania plans.

Easy Money by Howard Marks

In his latest memo, Marks characterizes the 13 years from 2008-2021 as “easy times, fueled by easy money” due to the Fed’s monetary policy and low interest rates. He then shares his thoughts on the investment ramifications of these those things. It’s a master class for those who have time to read it (or listen to the podcast version included). He summarizes the piece nicely at the end:

  1. The period from 1980 through 2021 was generally one of declining and/or ultra-low interest rates.
  2. This had profound ramifications in many areas, including determining which investment strategies would be the winners and losers.
  3. That changed in 2022, when the Fed was forced to begin raising interest rates to combat inflation.
  4. We’re unlikely to go back to such easy money conditions, other than temporarily in response to recessions.
  5. Therefore, the investment environment in the coming years will feature higher interest rates than those we saw in 2009-21.  Different strategies will outperform in the period ahead, and thus a different asset allocation is called for.