Allocation and Investment Committee Meeting 10/10/24
Our notes on the economy
Inflation continues to cool with the CPI moving down to 2.4% marking the lowest level since February of 2021. Remember June of 2022? CPI hit a whopping 9.1% at that time so this slowdown is nothing short of substantial. The employment rate continues to grow as well with the US adding 245,000 jobs versus an expected add of 132,000. This has kept unemployment low with the September reading of 4.1%. The historical average in the US is 5.7%. When looking at these figures, it makes us think that the average person in the US should be feeling somewhat better than they did a few years ago.
Our discussion on the bond markets
With rates continuing the lower progression down, the bond markets have been outstanding for investors who bought bonds last year. The Fed Funds futures rate still points to a low of 2.73% by September 2026. Currently we sit at 4.27%. Should the futures market prove to be accurate, the move still yet to come is massive. We look at the trend and not the week-to-week data that makes the markets as volatile as they are. The trend is our friend, and we like the way this works out for bond investors over the next two years.
Our discussion on the equity markets
The equity markets continue to march on despite the negativity in the air. The S&P 500 crossed the 5,800-mark last week for the first time in history. With that all-time high, the S&P has now had 45 all-time highs in 2024 and guess what, we are still not done with this year yet. This year’s index performance is up so far 21.9%. This is the best start to a year since 1997. So how did all the high paying market gurus do as far as predictions go? Out of the myriads of guesses, the S&P currently sits a whopping 400 points higher than the highest guess made.
From the MailBOX and Ryan Krueger
Of all the industries taken for granted in the U.S., but capable of improving standards of living and unleashing enormous productivity in other countries – air conditioners might be our favorite example. We are invested in a handful of different companies that are too busy to worry about politics, news, or the economy outside. They are creating their own climate inside for a growing list of customers, with accelerating demand just scratching the surface of potential for stakeholders.
Interesting thoughts we discussed
Chinese stocks have had just awful performance numbers in 2024 through September. Then October hit the calendar. In October, the indexes in China have jumped an astronomical 40% plus in just two weeks. You read that right. 40% in two weeks. How in the world did this happen? A couple of things. One, the Chinese central bank started lower rates but that is not all. The government also started making loans to the publicly traded companies in China to start buying their own stock or government sponsored stock buy backs to the tune of over $70 billion dollars. Another $40 billion was spent to fund corporate buybacks. And if that was not enough, the government also spent money in stimulus on homeowners by lowering rates on existing mortgages as well as lowering the minimum deposit needed to buy a second home.
Interest expenses on public debt in the US hit a record high last month with the rolling year amounting to $1.13 trillion over the last twelve months. In the not-too-distant future, if we keep going at this pace, the interest on debt that the US government pays out will be higher than what they pay on Social Security. Unbelievable.
Allocation suggestions
We are keeping our base allocation in place. We love the fact that both the stock markets and bond markets are delivering such outstanding results. When we get the waves, we simply ride them.
50% Stocks
30% Fixed Income
10-15% Private Investments or Alternatives
5-10% Cash/Money Markets
All investors and their plans are created differently, and every investor should have an allocation that fits their needs. The above allocation is what we call our “base” which primarily is for people looking to grow their assets. The percentages will change depending on where clients are in their lifecycle and plans.
Redfish Capital Management, LLC is registered as an investment adviser with the State of Texas and only transacts business in states where it is properly registered or is excluded or exempted from registration requirements. Registration as an investment adviser does not constitute an endorsement of the firm by the SEC, nor does it indicate that the adviser has attained a particular level of skill or ability.
The content presented is developed from sources believed to be accurate and should not be regarded as a complete analysis of the subjects discussed. All expressions of opinion reflect the judgment of the author and are subject to change. The information in this material is not intended as tax or legal advice. A legal or tax professional should be consulted for specific information regarding your individual situation.
The material presented is for general informational purposes only and does not constitute the rendering of personalized investment advice. Past performance may not be indicative of future results. All investment strategies have the potential for profit or loss. Different types of investments involve varying degrees of risk, and there can be no assurance that any specific investment or strategy will be suitable or profitable for a client's portfolio. Content should not be construed as an offer to buy or sell, or a solicitation of any offer to buy or sell any of the securities mentioned.
