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?
The S&P 500 recently surpassed 7,500 for the first time, marking another milestone in a year that has seen many new all-time highs. This is positive for investors, especially because several sectors have contributed to this rally. These trends have also fueled enthusiasm for IPOs, particularly ones related to artificial intelligence, after years of relatively few companies going public.
The Federal Reserve plays a central role in financial markets and the economy, and its importance has only grown in recent decades. From the 2008 global financial crisis to the inflationary period of the past several years, investors have followed every Fed decision carefully. So, when leadership changes occur at the Fed, they naturally capture the attention of investors and the broader public. At the same time, it’s important to understand what the Fed does and does not control when it comes to long-term investing.
For much of the history of the stock market, investing was primarily about individual stocks and bonds. Over the past few decades, however, macroeconomic developments have increasingly influenced markets. Significant events, whether related to central bank policy, geopolitics, or global trade, now affect nearly all stocks across the market, regardless of their individual stories. For investors, this means that building modern portfolios is less about finding attractive stocks, and more about making asset allocation decisions that are aligned with financial goals.
The human brain is excellent at finding patterns, a skill that has evolved to help us across many parts of life. However, it can also lead us astray when there is no real pattern at all, such as when we see shapes in clouds and ink blots. When it comes to investing, this is relevant because some patterns are important, such as the long-term relationship between the market and the economy, while others may be due to pure coincidence. Distinguishing between what makes for interesting trivia versus true investing principles is a challenging but important part of achieving long-term financial success.
April's performance is a reminder that markets can experience strong rebounds even in the face of ongoing investor concerns. Despite the continuing war in the Middle East, major market indices climbed to new all-time highs during the month. The S&P 500 gained 10.4% in April alone, one of its strongest monthly performances in history. On the surface, this echoes last year’s tariff-driven volatility and market rebound.
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