Our mission is to help you Preserve Your Assets and Protect Your Lifestyle. Our newsletter is aimed to educate you on the economic environment, as well as provide life perspective and financial planning ideas that can help you!

As always, your well-being is everything to us. If you have any questions about your financial or investment plan, please contact us anytime. 

Quarterly Market Review - Q1 2024 Investment Viewpoints

Below are some key observations from three of our research partners along with an outline of our conclusions. 

iM Global Partner’s Market Slides

a.  From an economic perspective, we enter the year on solid footing and believe a recession is unlikely in the first half of 2024. We think the biggest recession risk will come from weakness among consumers in the latter half of the year.

b.  All eyes will be on the Fed. When will the Fed start to cut rates, by how much, and why? Will the Fed cut rates enough to meet the markets’ lofty expectations? While these questions will be in focus, monetary policy is just one of many factors that will influence markets. Geopolitical risks, the U.S. presidential election, labor markets and inflation will likely fill the headlines and all could be sources of volatility.

c.  We think it is quite possible that 2024 will be a year where investors again enjoy some of the classic underpinnings of investing, where stocks and bonds are less correlated and provide diversification benefits to portfolios. This was not the case in 2022 and 2023, when stocks and bonds both declined meaningfully and then posted gains.

NDR Digest

a.  Global Asset Allocation Current:

i.  70% stocks (Overweight compared to 55% benchmark)
ii.  0% cash (Underweight compared to 10% benchmark)
iii. 30% bonds (Underweight compared to 35% benchmark)

b.  As we embark into the first quarter of 2024, we reiterate our outlook call that the Fed will eventually cut rates, project 1-1.5% real GDP growth, and believe that there’s a 70% likelihood of a soft landing. However, it is important to highlight that a key downside risk to our US outlook is an overzealous Fed that keeps policy restrictive for longer than necessary causing a recession. Given that our projection is for below-trend growth in 2024, it’s important to note that slipping into recession territory could be relatively easy.

c.  The market, however, is already pricing in around six rate cuts, somewhere between a soft landing and harder landing. That presents a downside risk should inflation prove to be stickier than the Fed expects and/or the labor market remains tight. Should the economy experience a harder landing, the Fed could cut rates by 200 basis points or more.

Schwab Market Perspective

a.  Economic pain is likely in 2024, but that doesn’t mean that stocks will struggle all year, especially if there is a continuation of the “rolling recessions” that have been characteristic of the recent economy. In essence, several key segments of the economy – including housing, manufacturing, and many consumer-oriented areas- have experienced recession-level weakness, while other segments, such as services, have not been hit by the same degree.

b.  Along the lines of the admonition “be careful what you wish for” it may be that if the Fed is cutting rates by mid-2024, it’s because of further deterioration in the economy – specifically the labor market. One of our key expectations for 2024 is that the Fed will begin to shift its focus from the inflation side to the employment side of the dual mandate.

c.  The big picture we see for 2024 is of a shallow U-shaped recovery, in global economic and earnings growth, rather than the V-shape seen in the last two global recessions 2008-09 and 2020.

Our Conclusions

-  The Fed is going to have to balance quite the tightrope of making sure that they have indeed tamed inflation while risking not being too restrictive, for too long as the US consumer is definitely showing signs of fatigue with inflation still having its lasting impact.

-  We continue to remain concerned about US stocks, specifically large cap given valuations and a top heavy market that has been driven by the Magnificent 7. (Amazon, Facebook, Apple, Microsoft, Tesla, Google and Nvidia). We see opportunities elsewhere in the market (value/dividend paying stocks, international/emerging market).

-   The investment environment for private credit is compelling. With the failure of Silicon Valley Bank and few others this past spring, many banks have become more selective about loans to higher risk companies in an effort to de-risk. As a result, private creditors have more opportunities to evaluate and more bargaining power to dictate lending terms. Secondly, while elevated interest rates are expected to decrease somewhat in the quarters to come, they should remain high enough to earn a substantial spread relative to inflation.

This Is Life - Just As Your Lives Change So Does Your Portfolio

By: Pat Guinet, CIMA®

Over the years we have used This Is Life to share personal stories with you about ourselves, our families, and our gratitude for being fortunate to have you as a client. We have been privileged to not only serve and advise your needs, but also the needs of your relatives, your children, and friends. Life however, does not only involve personal stories, there is the practical side of life in the advice we provide through developing financial plans as well as offering investment solutions that support personal goals and needs.

One of the practical “Life Decisions” we made when starting Guardian Financial Partners was to develop a finite set of portfolio offerings and models that would meet the needs of all our clients. Financial planning and/or risk assessment of each client allowed us to customize a plan, BUT when it came to the management of assets, we made the decision that having a finite set of investments and model portfolios constructed with the same set of investments was the best way to fulfill our role as your fiduciary, and more importantly, manage risk consistently.  As the number of clients we advised grew, we did not want our ability to manage portfolios and risk to diminish. We recognized each of our clients would have exposure to stocks, bonds, cash, and alternative investments. For example, one client could have 50% in bonds, while another might need 70% in bonds to meet the goals of their plan. The percentages might be different, but the bond investment chosen could be the same. By following this discipline in all recommended investment options and asset classes, we have been able to maintain a high degree of oversight, which we feel is a key characteristic of being a good fiduciary.

Recently we removed Janus Flexible Income(JFLEX) from all client portfolios and replaced the bond fund with two other bond funds in all client portfolios. The adjustment took days and not months to complete. All clients received the same price and execution. It did not matter how large or small an account was in size. The two funds that replaced Janus Flexible Income were the Performance Trust Strategic Bond Fund(PTIAX) and the ALPS/Smith Core Plus Bond ETF(SMTH). The transition was smooth and efficient.

In “Life” we each regularly make adjustments. We change our diet….. We exercise more…. Adjustments take little time since we are dealing simply with ourselves. In portfolio management, the added challenge is making adjustments for hundreds of clients and not simply a single client. Beware of the advisor who says your portfolio is unique to you and different from all other client portfolios: It's not a realistic statement and it can lead to asset management mistakes. We hope you appreciate the approach we have taken towards solving one of “Life’s” many problems in the practical world of asset management. It is important that we recognize your unique needs (your financial plan and risk tolerance), but also practical to execute decisions for all clients equally and fairly.

Preparing for Tax Season

As we approach February, taxes might be on your mind. Here's a brief checklist of documents to gather as tax season approaches.
 
Identification: Please ensure that you have your Social Security Number (SSN) or Individual Taxpayer Identification Number (ITIN) available. This includes the SSN for your spouse and dependents if you are filing jointly or claiming exemptions.
 
Income Documentation: 

• W-2 forms from all employers you (and your spouse, if filing jointly) worked for during the past year.
• 1099 forms if you had any additional income from self-employment, investments, rental properties, etc.
• Details of any other income, such as foreign income, unemployment income, or Social Security income.

Expense Documentation: 

• Receipts for deductible expenses such as medical costs, educational expenses, charitable donations, mortgage interest, real estate taxes, and work-related expenses.
• 1098 forms for student loan interest or mortgage interest.
• Details on any energy-saving home improvements you've made. They may be eligible for tax credits.
• Records of contributions to IRAs, HSAs, and 401(k)s.

Previous Year’s Tax Return: Having a copy of last year's tax return is extremely helpful, as it can serve as a guide and ensure consistency between years where applicable.
 
If you are unsure about a document or need further clarification on what you should be gathering, please feel free to email or call us anytime!