The stock market has climbed to new all-time highs following several periods of uncertainty this year. This is welcome news for investors, especially because many parts of the market have contributed to the rally, including sectors such as Energy, Information Technology, and Industrials. Interest rates are also near multi-decade highs, pushing bond yields to their most attractive levels in years. At the same time, investors should always be prepared for periods of volatility, which the past few years have shown can occur at any time.
With the November midterm election approaching, campaigns are starting to intensify across the country. Politics have only grown more divisive in recent decades, so it’s natural for investors to wonder whether the election should influence their financial decisions. More than ever, it’s important to separate our political views from investing, and not vote with our portfolios and financial plans.1
Treasury rates have surged to their highest levels in recent years due to a combination of concerns around inflation, oil prices, the national debt, and the Fed. The 10-year Treasury yield is once again above 4.6% and the 30-year has been above 5% for the longest streak since 2007.1 In general, this is positive for long-term investors since higher yields support portfolio goals such as income and stability.
In our modern world, computers and cell phones have become everyday necessities that are expected to simply work. Yet, there is unbelievable complexity behind not only the engineering that makes them possible, but also in the supply chains that allow millions of devices to be manufactured.
The baseball player Yogi Berra once said that “a nickel ain’t worth a dime anymore.” With inflation still elevated, many investors and consumers may be feeling this way as well. Not only are everyday costs higher due to energy prices, but short-term interest rates have fallen over the past two years.
This means that investors who have a significant portion of their portfolios in cash are seeing the purchasing power of their savings decline both as prices rise and as cash yields fall. With money market fund assets near record highs at $7.9 trillion, it’s likely that many investors have cash allocations that exceed what is appropriate for their financial plans.1 What do investors need to understand about the role of cash in their portfolios today?
For investors trying to understand the economy, recent reports have provided mixed signals, even leading President Trump to fire the Bureau of Labor Statistics commissioner. The latest jobs numbers showed weakness and negative revisions, but there are also signs that GDP growth rebounded in the second quarter. Corporate earnings continue to beat expectations, driving markets to new all-time highs, while tariffs and inflation remain concerns.
The S&P 500 notched ten new all-time highs in July, fueled by strong corporate earnings, resilient economic data, and new trade deals ahead of the tariff deadline. This included six consecutive record closes in the second half of the month, all of which contributed to year-to-date gains of 7.8% for the S&P 500.
While investors always look to corporate earnings for clues about how businesses are performing, the current earnings season arguably carries greater importance due to tariffs. Although major stock market indices have reached new all-time highs as trade tensions have stabilized, there is still uncertainty as to how tariffs might affect consumers and businesses. Fortunately, new trade agreements are being announced, and corporations are reporting earnings that are beating expectations.
Social Security, one of the most important government programs for retirees, has evolved over its 90-year history. As the aging population grows, so too do concerns about whether Americans will be able to rely on benefits in retirement. While Social Security is important, it is only one part of a well-crafted financial plan. In this economic and political environment, it's important to understand all of the components of retirement planning to achieve long-term financial goals.
Rainer Wealth Management
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