February 29, 2024

As Winter frost begins to thaw, warmer weather, longer days and an early Spring beckon our attention, but so do the financial opportunities and challenges which lie ahead. Let’s take a glance at some of the major themes our analysts have gathered for the month. 🌷💼

Market Resilience and Inflationary Pressures: despite a brief scare from stronger-than-expected inflation data, U.S. stocks have shown remarkable resilience, underscoring the strength of the market’s resistance to change. The data suggests that we may be experiencing a form of “rolling recession” in which the drip-drip-drip of economic updates do not upend the positive sentiment of investors. What does this mean? The Fed may have succeeded in engineering a “soft landing” for the economy, which is rare.

Active Strategy Emphasis: greater dispersions of returns are anticipated later this year, which favors an active investment management approach (as opposed to passive indexing). Whenever index-leading stocks like the “Magnificent Seven” begin to fall, so goes the index, but this gives a chance for other stocks to rise. Thus, actively managed fund strategies capture this potential, and aim to capitalize on the opportunities presented by market volatility and the broader economic shifts expected in the coming months.

Interest Rate Outlook: analysts’ forecasts for 2024 indicate that the Federal Reserve’s interest rate decisions remain a critical focal point. The anticipation of rate cuts, coupled with inflation (inching closer to the 2% target), suggests a supportive environment for equity markets in the near term. Realistically, we may see a pullback before we see a rise (bump and run), but we need to stay invested because nobody knows if, when, or for how long present conditions persist.

Geopolitical and Economic Transitions: the world economy continues to adapt to significant structural changes, guided by international policy and foreign affairs. This includes geopolitical fragmentation, economic re-regionalization, and a transition to sustainable economies. These shifts present both challenges and opportunities for our fund managers, emphasizing the importance of a strategic, forward-looking investment approach. It also presents another opportunity for actively managed funds over passive indexes to find “diamonds in the rough.”

Sectoral Shifts: our analysis continues to uncover the potential of certain sectors, particularly those benefiting from digital disruption and artificial intelligence (AI), to outperform in the current market environment. These sectors are poised to lead the charge as we embrace technological advancements and their economic implications. Presently, we believe the market is favoring technology, healthcare, and consumer discretionary sectors. This viewpoint is strongly supported by the changes to underlying holdings of funds we follow.

As we march into March, we remain steadfast in our commitment to guiding you through the complexities of this financial world. Please reach out if you have any questions about your financial goals and your portfolio.

Fun Fact – Leap Year Lore: Did you know that according to an old Irish legend, St. Brigid struck a deal with St. Patrick to allow women to propose to men – but only on February 29, which occurs every leap year? This tradition was intended to balance the traditional roles of men and women in a similar way to how leap year serves to balance the calendar. 🍀💍History.com: Leap Year Traditions