Navigating Market Uncertainty and Elections in 2024| AWM Insights #187
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Episode Summary
2023 was a year filled with surprises. It showed us how different predictions are from reality. As we kick off a year that is already starting with a lot of uncertainty and ending with a presidential election, it's critical to keep the lessons we have already learned top of mind.
The key to successful outcomes is to block out the noise and focus on what matters over the long term. Market fluctuations are like the turbulence that a well-positioned portfolio can weather. It is imperative to stay disciplined, avoid emotional investment decisions, and continuously align your portfolio with personal priorities.
There will be bumps along the way. Getting over the bumps and to the other side is what separates the best from the rest.
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Episode Highlights:
00:03: Intro
00:38: Current market dynamics and earnings expectations
02:19: Uncertainty around interest rates and difficulty predicting markets
03:24: Impact of the upcoming presidential election on markets and portfolio positioning
04:30: Prioritizing short-term goals
05:53: Emotional investment decisions and the importance of personal priorities
08:50: Text us!
+ Read the Transcript
Brandon Averill (00:03): Hey everybody. Welcome back to another episode of AWM Insights, Brandon and Justin here, and we're excited to be back with you. Last time we went through a little bit of a recap of 2023, what happened to the surprising, to the not so surprising and how we navigated those waters and thought it would be good if we just spent a few minutes today talking about 2024, looking ahead. You're not going to get the Nostradamus, we're not pulling out the crystal ball. Hopefully you know by now, that is not how we view markets, although I got asked that question the other day in an interview, so that was fun to answer.
(00:38): But at the end of the day, there is a lot that's going to happen this year. We do know that, right? We do know that we're going to have markets that go up, we're going to have markets that go down and we got some pretty interesting events ahead. We got an election that is definitely going to be interesting. I think that's pretty safe to say. I don't know interesting which way of course. But I think we'll spend a little bit of time or I'd love to spend a little time, Justin, just, I mean on the micro, like what are some of the things, headlines that are popping up, it's earning season.
(01:09): And then some of the stuff that we're looking ahead later in the year that I think people are starting to probably filter into their investment decision making and maybe why that's a good decision, why that's not. I asked you a lot of questions there, so maybe just start with the micro. Let's start with earning season. What's going on right now? What do you see for 2024 and how can we refocus?
Justin Dyer (01:30): Sure. Yeah. There's a lot to cover there and I mean that's what markets do. Markets incorporate all sorts of information and come up with some sort of answer and we try and predict that, or I shouldn't say we try and predict that. Collectively, we as society try and predict it and more often than not, we're wrong. So to get to your question specifically, it is earning season. I think it's fair to say that there's a slight optimism, slight positive expectation around earnings after pretty weak performance or weak expectations for most of last year where the tide really did shift pretty drastically in the opposite direction from expectations, and it's not all that surprising to see that.
(02:19): We're coming off of really, really solid year and just overall people are feeling a little bit better. Consumer sentiment is a little bit better than it was. I think expectations, like I've said, around earnings are expected to be a little bit stronger and then you have kind of this big wildcard, I think, that's still out there. This is not necessarily present quarter, but potentially, and that's around interest rates. Five weeks ago there was a pretty big, pretty strong movement to expect interest rates to come down, Fed to cut rates, and that's bounced around since then.
(02:52): We've gone from, oh wait a second. No, we're not going to do it as fast as we have, or as fast as we thought, and now we're maybe back to more on like, hey, the Fed is going to start to cut interest rates a little bit faster. Suffice it to say there's a lot of moving parts to all this and we certainly can't predict the future. To your point, we're not going to take out our crystal ball and act like Nostradamus here, but we do know that there's going to be a number of different news stories. Internally, last week we were looking actually at this.
(03:24): There's a great chart that is often produced where you look at a year and you just see all the meaningful news stories that happen throughout the year and then try to predict or you assess how the market actually reacted to it, and nine times out of 10, it's probably different than what you would've necessarily expected. So we know that, like you said and I've said multiple times, there's going to be some momentous events. Some of them we don't know about at all. Some of them we do. There's a presidential election right around the corner.
(03:58): In the world we live in right now, that's going to be very interesting, to your point, and arguably market moving. It certainly was a couple years ago around this time, and we need to plan for that, but we plan ahead for these impactful events, good, bad or indifferent. Not to say we're trying to predict them, but we have an all-weather portfolio, a portfolio that is really designed ahead of time to deal with the uncertainty that exists within markets.
Brandon Averill (04:30): And that makes a lot of sense and it really is that moment to refocus. If you're refocused on your priorities, to your point, and you're really identifying, hey, in the short term over the 12, 18, 24 months, these are my essential priorities, the things that I know have to be funded. Quite frankly, it doesn't matter what happens this year. We're protecting those in a way that there's still a high level of certainty that that money is going-
Justin Dyer (04:56): That's right.
Brandon Averill (04:56): ... To be there to fund your priorities. And then what we know also is that, like you said, events come and go. We couldn't have predicted 9/11, we couldn't have predicted. Some people did predict, but you couldn't have predicted the 2008 financial crisis to the extent that it happened. You certainly couldn't have predicted the global pandemic and everything that went on there, but what we can predict is that those types of things will happen. We just don't know what are going to come.
(05:24): And if we use history as our evidence, as our guide, then we can look forward and say, hey, if we're playing with 10, 15, 20 year time horizons, we can allocate assets in a way that ultimately help you to grow your wealth, help you to achieve those priorities to meet those important and ultimately those discretionary priorities. And so it is really checking our emotions, I feel like, at these times. Like you said, last year, there's probably the sentiment was a little bit worse. Right? And If you-
Justin Dyer (05:52): Yeah. 12 months ago.
Brandon Averill (05:53): ... Didn't stay invested, think about what would've happened. We're going to throw just as much caution towards tuning out the noise right now is, hey, things feel pretty good. We had a really good equity market, a good stock market last year. Now is not the time to be like, oh, let's throw caution to the wind and forget about my priorities and let's go all equities and let this bad boy ride. That's not the time either. It's tempting because we all want to make money, but it's time to stick with basics, tune out that noise and not do that.
Justin Dyer (06:24): Yeah. One old adage I probably say too much is markets climb a wall of worry, and there's two key points in that. I mean, it's a short statement, so there's a lot of key points. But climb, first of all, markets generally go up, but they don't go up in a straight line and there's a lot to be worried about almost every single time. So you can't let any one of those two emotions, kind of to your point, override one another. You need to have a plan in place. You need to understand your priorities. You need to really take the time and effort to think through that, what's important to you.
(06:59): We say money is a tool to accomplish your priorities, and that's really, really, really, it's a simple but incredibly powerful statement and super important to us as AWM. And if you've put the time, energy, and effort there, we are there to support you and build the portfolio that gives you the highest level of confidence knowing that there's going to be these strong forces, both emotional forces, market forces that are constantly at play in this world. But to your point, over very long periods of time, we have really, really high confidence in your ability, client's ability to meet their priorities and really what truly is important in life.
Brandon Averill (07:37): I think that's helpful, and we kind of teased this out for everybody. We will be launching on a new little series here going into the election. I think it's a big deal. It's going to dominate news headlines from now until the end of the year and probably beyond-
Justin Dyer (07:53): Beyond.
Brandon Averill (07:53): ... The end of the year depending on what happens. And what we'll really focus on to get to the punchline is while it's extremely interesting and there's going to be all kinds of noise and media around how it may impact your financial portfolio, you don't have to go too far back in recent history to understand that even with turmoil, it goes back to the basics. It goes back to the plan, and it's just understanding, hey, I just have to be comfortable with the plan that I have in place. And if I am comfortable with that, quite frankly, the outcome of the election does not matter.
(08:26): And so the data supports that. The emotions will not support that. And so we're here to remind you of that. And so if you have questions around this, you want us to hit on specific topics, please shoot us a text, 714-504-7689. We'd love to address it. And until next time, own your wealth, make an impact, and always be a pro. I forgot.
Justin Dyer (08:50): He's rusty.