Insightful Ideas

To paraphrase Ernest Hemingway, shifts in the stock market often occur “gradually, then suddenly.” Over the past month, the market has rotated from large cap technology stocks to small caps and other sectors. Following the latest jobs report, however, stocks experienced a sharp pullback due to concerns over the timing of Fed rate cuts, a weakening labor market, and tech earnings. Financial markets are on edge as investors adjust to a potentially changing economic landscape.

It’s a topic we’ve covered before: investing during an election year can be tough on the nerves, and 2024 promises to be no different. Politics can bring out strong emotions and biases, but investors would be wise to put these aside when making investment decisions.

As we enter the second half of the year, it’s important for long-term investors to maintain perspective on the major events that have driven markets. Despite ongoing economic uncertainty, the stock market has experienced a strong rally as investors anticipate the first Fed rate cut and the rally in artificial intelligence stocks continues.

Having hit 31 record highs since January and up more than 15% year to date, the S&P 500 is off to its best start to the year since 2019 and the best start to an election year ever, driven by mega-cap tech stocks and artificial intelligence (AI) tailwinds. See what else has happened in 2Q24. AND How Presidential Elections Affect the Stock Market: https://youtu.be/Hp3bAi8VCe4

What Dow 40,000 Means for Consumer Net Worth. The Dow Jones Industrial Average reached 40,000 for the first time recently as markets continue to rebound from a 5% decline earlier this year. While this has felt like a difficult year for many investors due to inflation, high interest rates, and growth concerns, the reality is that the broad market has achieved 23 new all-time highs. Other asset classes, including international stocks, commodities, and even gold, have surged alongside the U.S. stock market as interest rate expectations have fallen.

Cash is an essential part of any financial and investment plan. It's important to have enough cash to serve as an emergency fund in case of unexpected personal events such as injury or illness or broader events such as an economic downturn. From an investment standpoint, cash can also serve important roles including reducing overall portfolio risk and by allowing investors to take advantage of attractive market prices.