As the stock market reminded us last week, September can be a notoriously tough month for investors. Historically, this time of year brings heightened volatility, and 2024 may be shaping up to be no different. With uncertainty swirling around the economy, markets, and politics, it’s important to maintain a clear head. After all, volatility is part of the investing landscape – and pullbacks in the market should be expected.
Here’s where we stand, and how these uncertainties break down into three major categories:
1. The Economy: Slowing Down
Recent data suggests the economy is cooling off. The manufacturing sector has contracted in 11 of the past 12 months, and job creation is slowing. In my view, the Federal Reserve has kept interest rates higher for too long. It’s time for a shift. While the supply chains were previously clogged, shelves are stocked with goods – from toilet paper to chicken to automobiles. The Fed was late raising rates last time; let’s hope they don’t repeat the mistake by waiting too long to ease going forward.
2. Stock and Bond Markets: A Balancing Act
Up until recently, stocks were pricing in an “economic soft landing” – the idea that the economy would cool without sliding into a recession. With last week’s sell-off shows investors are concerned the Fed may be too late to guide us there. Meanwhile, bonds are seeing lower yields and rising prices, as investors seek safety. This is where a well-diversified, balanced portfolio can have advantages, especially if your close to or currently retired.
3. The Political Landscape: Taxes at the Forefront
Unless you’ve been living under a rock, you know the Presidential debate is happening this Tuesday. While you’ll likely be reading this post after the debate (thanks to compliance reviews), the key issue for investors remains the same: Taxes. Trump is pushing for more tax cuts, while Harris is advocating for tax increases on those earning over $400K and on corporations. There are some interesting proposals floating around, such as eliminating taxes on tips, not taxing Social Security benefits, and offering $25K to first-time home buyers. I’m sure there will be more to come.
Will either candidate address our ballooning deficit and national debt? Probably not as fiscal responsibility does not get anyone elected today!!
While there are certainly other factors and issues at play for our election, this blog is focused on the issues that will directly impact your money, in the near and intermediate term.
No matter what the headlines say, staying diversified and ensuring your portfolio is asset-allocated to fit your personal financial situation is the most prudent strategy.
