[Music] [Applause] [Music] hello and thank you for tuning in to another edition of the monthly Market rooll where we provide a look back at the economy markets and Investments and other macroeconomic data for last month and then we roll forward to this month with our insights for what lies ahead I'm Brad Ry a partner senior director of portfolio management at Waverly I'm joined by my good friend colleague I'm John Cox I'm Chief investment officer of public markets so I'd say we get right into it John uh it's it's been an exciting first half right we've we're gone through q1 Q2 we've made it to the halfway point give me a little bit on your general thoughts what you've seen up to this point and how things how things are looking for for the economy and markets yeah it has been a good start uh for 2024 the first six months we've had pretty good economic numbers when you look at GDP growth it was uh one and a half% for the roughly one and a half% for the first quarter we're looking at about 2% for the second quarter uh the job growth has continued to be pretty strong but it's tapered off just a little bit which is not necessarily a bad thing when it comes to the FED which we'll talk about later unemployment ticked up from a low of 3.4% up to slightly above 4% inflation has started to moderate a little bit over the last couple of months so things are shaping up a little bit better for the economy uh the markets have done well in 2024 but it's been uh there's been a pretty big dis ersion among the best asset classes and those that have not done quite as well overall Global equities are up 10 or 11% for the year bonds are kind of flat but it might be setting up for a pretty good second half of the year here's John and myself and I would say three main factors you saw we're going to break this into two sections the way we normally do talk about what we've seen and John got into a little bit on the macro side three main points on what we've seen they're going to roll into kind of next month next quarter the rest of the year but I would say big Tech is definitely dominated you know that's been a big big part of uh the story if you watch CNBC Central Bank dislocation you're starting to see the Federal Reserve is always the main game in town what are they doing you know but if you look at what you know European Central Bank is doing you look at uh Bank of England Bank of China Bank of uh Japan all doing a little bit different things and I think that's creating some dislocation and then a really strong first half uh of the year and so I'd say let's get right into it uh this is the chart I I really thought this is a powerful chart we have some of our great analysts came up with uh this chart but what's this chart say to you John I I think this is this to me shows kind of what's been going on this year so far yeah it really emphasizes the fact that the S&P 500 has done so much better than other asset classes and we have to keep in mind we're we're just at the halfway point so in in any given year if a investment or an asset class was up five or six% at this point in the year we'd be excited but the fact that the S&P is up 15% puts a little bit of a damp on on the returns of the other categories but as we've seen in time asset classes move kind of in and out of favor right now as we'll talk about later there's a lot of optimism about technology companies and and corporate earnings but there also some some asset classes that are positioned to do really really well when when that that um cycle turns a little bit so um all in all great start to the year diversification uh will will continue to to benefit investors as we go forward yeah I think it's a good setup I think the key thing is just keep that diversification uh understand where things have gone don't overstretch for things every time we've gone through I can think throughout my career 87 89 94 all the different periods where you said oh this is a new new thing we just want to keep it balanc we're not saying that technology isn't going to do really well we're just saying try to keep that balance try to have a reasonable you know you want to have a good volatility and I think fixed income is also very interesting we're gonna we're going to talk about that a little bit later uh but this one I think just thinking worldwide right we invest worldwide with International uh and I think the dollars played such a key factor uh in in performance and you saw you know central banks some are cutting the US is keeping it stable you can see the impact what is your thoughts on International investing you know the dollar is definitely strong makes sense right we have the best growth right now however you know it it could change and dollar diversification has its benefits what are you seeing from International markets and and some of the dis location you're seeing from central banks yeah International has been International equities have been somewhat out of favor for several years now and the dollar has been stronger as you mentioned uh valuations appear to be much better outside the US even though earnings growth and and Technology favors favors the us but we've seen some changes in Fed rate policy and even uh in the last few weeks with some of the US economic data coming in a little bit lighter than expected it's it's uh increase the odds that the FED will will cut rates in September which previously was sort of off the table but the markets are saying there's a 75% chance that there's a rate cut in September which would likely be a good kind of catalyst for for the markets and and to keep the economy um you know out of recession or or away from a downturn and and then another rate cut projected in December so right now it looks like the FED may cut rates as much as half a percent in 2024 and then continue that rate cut cycle into 2025 so that will that could have some impact on the dollar it could have some impact on on International Investments uh but more than anything it's going to um try to prevent any economic deterioration in the US yeah markets love moderation right they love moderating inflation they love reasonable growth they I mean markets really don't like 5% GDP growth they don't want to see 9% inflation they love this type of Market where it's moderate unemployment moderate growth doesn't have to be I think a lot of people think ah we need 5% GDP growth we need all these things to have a good Market that's definitely not the case and I think you are having a you can see in the market right now it is liking this moderate type of thing uh and moderate economics and so I do think and you see obviously this is similar to what we saw before but this is just kind of Q2 where the S&P uh outperform other markets and we see it in a couple other graphs you see it here we're just saying hey we understand that this is happening thinking about portfolio construction and how we want to position things and what things we think have value and so we're just always looking at all these things and these are just other examples of of things that we're looking at but let's say we're rolling into July rolling into the next uh you know uh the rest of the year uh I would say one of the things that we've seen a lot of interest is Cash is King how are people doing on their fixed income we do think there's ample opportunities in the fixed income and then just thinking about where we are right now comparing it to other years in the S&P 500 and just thinking about how how how we're comparing and so the one thing and and John I know you get you you you talk to clients every day this is something everybody's talking about it's really amazing thinking we had no rates for 20 years and now you're seeing that you're G have potential to make over 5% you know on an annualized basis for basically cash but there's lots of ideas in cash it isn't just money market I know you know advisers are talking to clients clients are asking all the time about cash and money market T bills there's lots of different ideas here I just think if clients are looking at this they have cash on the sidelines we have a lot of ideas come come talk to your adviser about different ideas that we have on cash money Market's one of them but we look at a lot of things we have all kinds of different things to look at right now and so but to me it's very exciting I guess just because for the first I guess the last 20 years it has been terrible uh what are you hearing from clients you know in their desire for fixed income and money market Investments they have cash on the sidelines and obviously throwing off a lot of cash right I think that's one of the key things with the economy right now we have a lot of cash being thrown off from Investments it's creating this you know effect that people feel wealthier because of all the the yield that they're getting which they didn't get for a long time right yeah I think there's uh the last statistic I saw was there's something like six trillion dollars in money markets or short-term Securities and we still have this interesting Dynamic of an inverted yield curve where short-term interest rates are higher than long-term interest rates that probably won't persist for too much longer uh we should start to see that more that yield curve normalize in the next 12 to 24 months but when when clients think about the most conservative part of their portfolio they need to determine what's the what's the time Horizon of of the cash and if they have short-term cash needs if there's a purchase on the horizon that's within six to 12 months then that may uh lead them to one lead us to recommend one type of investment if the time Horizon is one to three years then we may look at a different type of short-term investment but like you said there are opportunities across the whole landscape of fixed income it's not just treasuries but corporate bonds look good um some below investment grade Securities might be appropriate uh in certain situations we've looked at private credit um mortgages non- us Securities the the opportunity set in fixed income like you said is is probably as good as it's been in the last 10 to 15 years so equities are still positioned to do well but this is this is it's exciting to see good opportunities and fixed income this was just something I think is interesting it's it's really just gives perspective right and one how well things have gone but I think a lot of people think this year is just so much different than any other year and this chart I I don't I'm just such a I guess a Quant by nature and found this pretty interesting that you have almost the exact same return the last three months at the end of each three months and it just shows it isn't any different this time necessarily it's just a different structure it doesn't mean that you're not going to have volatility this was last year we had a little bit of volatility at you know going into this is basically Q3 going into Q4 uh give me a little bit just to wrap things up you know what's your overall perspective on markets as we go through you know the rest of the year uh how how are you feeling about you know markets at this point yeah I mean obviously still uncertainty with um the election and and um last year August September October were not great months and then we really rallied in November and December we don't know if it'll follow that pattern this year a lot of that's going to be dependent on corporate earnings whether the economy can continue to to generate a decent amount of growth and If the Fed does go down that rate cutting path and start to um get interest rates back to more normal levels so I mean I think obviously there are always factors that are out of our control and things that we can't really predict but when you just look at the big picture and look at kind of the global economy the global markets uh there there are concerns but there are also a lot of reasons to be optimistic so as long as investors have a three to five year time Horizon um you know they should kind of stay invested we'll have good months and bad months and they shouldn't be um changing their uh their risk tolerance too frequently unless their circumstances change no I think you wrapped up you took most of my concluding comments here John I think long-term definitely positive like you said three to five years we're still you know very optimistic shortterm certainly cautiously optimistic you have a nice run you have some different risk factors who always worried about different things uh you know that can happen in the economy but overall the econom is in good shape you know as we move into you know the second half of uh of the year and so John thanks for uh coming on on again I really appreciate it and thank you everyone for listening to the monthly Market role if you like what you heard and have any questions about the topics we discussed today feel free to reach out to Waverly advisers any of our advisers we'd love you to reach out to them some of the things especially we talked about interest rates what's going on in the economy we think it's a good time to reach out to your adviser uh talk about these things information on how to reach us is in the description you can get more information at Waverly advisors.com thanks again for watching and we'll see you on the next video [Music] oh