Market Views

JUL 2024

US stocks, as represented by the Standard & Poor’s 500 Index, declined in April before resuming a gradual upward trend in May. For the first six months of 2024, the S&P 500 returned +15.3% but most S&P stocks didn’t fare as well. A handful of very large technology companies dominate the capitalization-weighted S&P 500, so their returns skew the index’s results. If each of the companies in the index is given equal weight, the index returned +5.1% during the six-month period. This wide gap in returns has persisted for much of the last two years, driven largely by enthusiasm about artificial intelligence. This reminds us of how past innovations have ignited unsustainable surges in narrow groups of stocks.

APR 2024

Upward momentum continued in the US and other markets, such as Japan, during the first quarter of 2024. The market capitalization-weighted S&P 500 Index returned a solid +10.6%, aided partly by continued strong performance by the Magnificent Seven stocks (Apple, Microsoft, Google parent Alphabet, Amazon, Nvidia, Facebook parent Meta Platforms and Tesla), which returned +17.1% on an equal-weighted basis. The equal-weighted S&P 500 Index’s returns were positive (+7.9%), but it still underperformed its capitalization weighted counterpart, reflecting the disproportionate influence of the megacap Magnificent Seven. The Dow Jones Industrial Average returned +6.1%. Smaller capitalization stocks continued to underperform with more modest returns of +5.2%.

JAN 2024

US stocks lost ground from mid-2023 through the end of October before staging a powerful move higher. Overall, the year produced strong returns that essentially wiped out the losses of 2022. Until October, the market was driven by a handful of very large technology companies. However, in the last two months of 2023, stock market performance broadened—a healthy sign. The capitalization-weighted S&P 500 Index returned +26.3% in 2023, which was notably higher than most other equity indexes, due to the dominance of several larger stocks. China’s economic, political, and social stresses led to losses in Chinese equities last year.

OCT 2023

US stock prices declined between the second and third quarter of 2023. Year-to-date returns remained strong—the S&P 500 Index returned +13.1%—as stocks held onto the majority of gains achieved earlier in the year. Similarly, bond prices declined as intermediate and longer-term Treasury yields rose. The US 10-year Treasury yield increased to 4.59% from 3.81% in the third quarter as US economic growth proved stronger than expected. Large budget deficits and concerns over the increased Treasury bond issuance to finance those deficits may also be pressuring yields.

JUL 2023

Stocks continued on an upward path in the second quarter. Over the first six months of 2023, the Standard & Poor’s 500 Index returned +16.9% while the Dow 30 Industrials Index returned +4.9%. For much of 2023, performance has been driven by a handful of large technology stocks, most of which benefited from enthusiastic interest in artificial intelligence. The S&P 500 Index is capitalization-weighted where the largest companies have a much greater impact on the performance of the index. The equal-weighted S&P 500 Index returned +7.0% in the first six months of the year.

APR 2023

After rising nearly 9% in the first five weeks of 2023, markets gave back most of their gains by early March then staged a recovery into quarter end. The S&P 500 Index returned 7.5% over the first three months of the year while the Dow Jones Industrials returned 0.9%. Unexpected problems at several regional banks developed late in the quarter, creating fears of a wider crisis. Emergency support measures by the federal government have so far restored confidence in the banking system. With inflation still too high, the US Federal Reserve continued raising short-term interest rates. Longer dated Treasury yields declined on renewed concerns of a recession.

JAN 2023

Strong pessimism at the end of September set the stage for a rebound in equity prices in October and November before the markets faded in December. For the fourth quarter, the Standard & Poor’s 500 Index returned +7.6% while the higher-quality Dow Jones Industrials surged +16.0%. For the year, the two indexes returned –18.1% and –6.9%, respectively. As seen in the Market Indicators box to the right, other domestic and international indices produced negative total returns ranging from –20.7% to –13.1% last year. The technology-heavy NASDAQ index returned –32.5% in 2022.

OCT 2022

The Standard & Poor’s 500 Index continued its 2022 downtrend, returning –4.9% in the third quarter. The index has returned –23.9% year-to-date and ended the third quarter below its June lows, even after a sizable summer surge. Thus far in 2022, the market has had three trough-to-peak rallies in the 5%-10% range and two in the 11%-20% range. Such rallies are typical of bear markets and reflect ongoing uncertainty and the push-pull of investor reactions to new economic, geopolitical, and fundamental developments.

JUL 2022

Stocks fell at a faster clip in the second quarter as inflation continued its upward march and the Federal Reserve reacted by further increasing interest rates. The Standard & Poor’s 500 Index returned a negative 16.1% in the quarter. The technology-heavy NASDAQ Composite returned a negative 22.3%. The higher quality Dow Jones Industrial Average held up better, returning a negative 10.8%. Many international markets outperformed US markets due to their heavy weighting in financials and low weighting in technology.

APR 2022

Most major US stock market indices ended the first quarter below the peaks achieved at the beginning of 2022. Concerns about high valuations and higher interest rates drove declines in late January. In February, markets fell more following Russia’s invasion of Ukraine. After bottoming in early March, markets recouped a large part of their losses despite continued high uncertainty. Through March 31, the S&P 500 Index returned –4.6% after being down nearly 13% at its worst. The most speculative, high-priced growth stocks declined the most over the first three months of the year. The Nasdaq Composite, which is weighted toward growthier technology stocks, returned -8.9% after being down close to 21% at its lows.

JAN 2022

The Standard & Poor’s 500 Index had another strong year, returning +28.7%. The higher quality Dow Jones Industrial Average returned +21.0%. Mid- and small-capitalization equities were not far behind (see market indicators table to the right). International equities underperformed US equities. The MSCI EAFE Index of developed country stocks returned +11.5%. Dragged down by weakness in Chinese equities, the MSCI Emerging Markets Index returned –3.6%.

OCT 2021

Stock prices continued moving steadily up in July and August before faltering in September amid growing predictions of a correction. During 2021’s first nine months, the Standard & Poor’s 500 Index continued leading other indexes with a return of 15.9%. The higher-quality Dow Jones Industrials Index returned 12.1%. In general, riskier, “higher beta” stocks performed best. With the notable exception of Chinese stocks, most other non-US equity indexes also produced attractive returns. Chinese stocks suffered as new central government regulations limited some business activities and highly leveraged Evergrande, China’s second-largest real estate developer, teetered on the brink of financial collapse.

JUL 2021

US equity markets continued higher in the second quarter with several key indexes setting new highs in late June. The Standard & Poor’s 500 Index returned +8.6% during the quarter to bring the year-to-date return to +15.2%. Most other indexes produced more modest returns during the three-month period as investors seemed to rotate between sectors in search of undervalued companies. For example, small-capitalization stocks only returned +4.3% and a popular China index returned –0.4% during the quarter.

APR 2021

The stock market’s upward trajectory moderated as the Standard & Poor’s 500 Index returned +6.2% during 2021’s first quarter. Many of the large technology company stocks that led the market’s 2020 rebound sat out the first quarter of 2021. Stocks from the previously underperforming sectors of energy and financials shined. As the Market Indicators chart to the right shows, mid-capitalization and small company stocks had a particularly good quarter. The 12-month performance for all equity indexes is impressive. However, those gains include recovering from the market plunge that preceded the period’s start.

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