Archives: Insight

Weekly Market Insights – Monday, February 12, 2024

Stocks Hit Record Highs Amid Favorable Earnings and Inflation News:

Last week, stocks experienced substantial gains, ending the trading week on a positive note. This growth, driven by robust corporate reports and favorable inflation news, propelled the S&P 500 Index to reach a new record high by the end of the week.

S&P Tops 5,000

At the start of last week’s trading, stocks faced downward pressure due to comments by Fed Chair Powell over the weekend, signaling that the Federal Reserve had no immediate plans to initiate interest rate cuts. Consequently, the yield on the two-year U.S. Treasury note, highly influenced by monetary policy, increased to its highest level in two months.1
By the end of trading on Monday, stocks had regained a significant portion of their previous losses. Influencing this market rally were positive corporate earnings reports. This trend continued throughout the week, contributing to the overall market momentum. By Friday, 67% of the companies listed in the S&P 500 had released their Q4 results, and an impressive 77% of those companies exceeded earnings expectations.2
Investors expressed enthusiasm on Friday after a report indicating that December’s inflation was lower than initially anticipated. This positive news revitalized buying activity, resulting in the S&P 500 surpassing 5,000 for the first time.3

Source: Charles Schwab & Co., Inc

Economic Strength

The strength of the U.S. economy has come into the spotlight. An analysis conducted by The Wall Street Journal recently proposed that the economy’s resilience could be attributed, at least in part, to the productivity driven by the technology sector.4
What might rein in that productivity? One possible influence could be the increase in oil prices witnessed last week. Additionally, shipping companies have been imposing surcharges for several months to mitigate recent conflict, and these charges may contribute to global inflation this year, potentially dampening investor enthusiasm.5
The Wall Street Journal’s headline after the FOMC meeting on Wednesday suggested that rate cuts were possible but not expected immediately. The FOMC’s policy language indicated a subtle shift from considering rate cuts to proposing they could be possible unless inflation became a concern.3

This Week: Key Economic Data

Source: Bloomberg Finance L.P.

This Week: Companies Reporting Earnings

Source: EarningsWhispers

At Concord Asset Management, we design portfolios for the long run, with the ability to navigate various market cycles. However, you can have confidence that we are monitoring these market-moving events, and we will make reasonable, tactical adjustments as necessary.

Author

Gary Aiken
Chief Investment Officer
Concord Asset Management
—

Footnotes and Sources

1The Wall Street Journal, February 4, 2024
2FactSet.com, February 9, 2024
3CNBC.com, February 9, 2024
4WSJ.com, February 8, 2024
5CNBC, February 9, 2024

The companies mentioned are for informational purposes only. It should not be considered a solicitation for the purchase or sale of the securities. Investing involves risks, and investment decisions should be based on your own goals, time horizon, and tolerance for risk. The return and principal value of investments will fluctuate as market conditions change. When sold, investments may be worth more or less than their original cost. The forecasts or forward-looking statements are based on assumptions, may not materialize, and are subject to revision without notice. The market indexes discussed are unmanaged and generally considered representative of their respective markets. Index performance is not indicative of the past performance of a particular investment. Indexes do not incur management fees, costs, and expenses. Individuals cannot directly invest in unmanaged indexes. Past performance does not guarantee future results. The Dow Jones Industrial Average is an unmanaged index that is generally considered representative of large-capitalization companies on the U.S. stock market. Nasdaq Composite is an index of the common stocks and similar securities listed on the NASDAQ stock market and is considered a broad indicator of the performance of technology and growth companies. The MSCI EAFE Index was created by Morgan Stanley Capital International (MSCI) and serves as a benchmark of the performance of major international equity markets, as represented by 21 major MSCI indexes from Europe, Australia, and Southeast Asia. The S&P 500 Composite Index is an unmanaged group of securities that are considered to be representative of the stock market in general. U.S. Treasury Notes are guaranteed by the federal government as to the timely payment of principal and interest. However, if you sell a Treasury Note prior to maturity, it may be worth more or less than the original price paid. Fixed income investments are subject to various risks, including changes in interest rates, credit quality, inflation risk, market valuations, prepayments, corporate events, tax ramifications, and other factors. International investments carry additional risks, which include differences in financial reporting standards, currency exchange rates, political risks unique to a specific country, foreign taxes and regulations, and the potential for illiquid markets. These factors may result in greater share price volatility. Please consult your financial professional for additional information. This content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and they should not be considered a solicitation for the purchase or sale of any security.

Concord Asset Management, LLC (“CAM”) is a registered investment advisor with the Securities and Exchange Commission. CAM is affiliated, and shares advisory personnel with Concord Wealth Partners (“CWP”). CAM offers advisory services, including customized sub-advisory solutions, to other registered investment advisers and/or institutional managers, including its affiliate, Concord Wealth Partners, LLC. CAM’s investment advisory services are only offered to current or prospective clients where CAM and its investment adviser representatives are properly licensed or exempt from licensure.

The information provided in this commentary is for educational and informational purposes only and does not constitute investment advice and it should not be relied on as such. It should not be considered a solicitation to buy or an offer to sell a security. It does not take into account any investor’s particular investment objectives, strategies, tax status, or investment horizon. You should consult your attorney or tax advisor.

The views expressed in this commentary are subject to change based on the market and other conditions. These documents may contain certain statements that may be deemed forward‐looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected. Any projections, market outlooks, or estimates are based upon certain assumptions and should not be construed as indicative of actual events that will occur.

Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by CAM or its affiliates, or any non-investment related content, made reference to directly or indirectly in this newsletter will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this newsletter serves as the receipt of, or as a substitute for, personalized investment advice from CAM or CWP. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. CAM and CWP are neither law firms nor certified public accounting firms, and no portion of the newsletter content should be construed as legal or accounting advice. A copy of CAM’s current written disclosure Brochure discussing our advisory services and fees is available upon request or at https://concordassetmgmt.com/

Please Note: If you are a CAM or CWP client, please remember to contact us, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services, or if you would like to impose, add, or to modify any reasonable restrictions to our investment advisory services. CAM and CWP shall continue to rely on the accuracy of the information that you have provided. Please Note: If you are a CAM or CWP client, strong>please advise us if you have not been receiving account statements (at least quarterly) from the account custodian.

Demographics: Tailwind or Headwind?

By Gary Aiken | February 7, 2024

There is a saying, “Demographics is destiny” attributed to French philosopher Auguste Comte. Demographers specialize in analyzing and predicting shifts in the size and composition of human populations. Economic historians study the impact of these demographic shifts on wars, scientific advancements, and the evolving political economies of nations. Both disciplines often provide reliable forecasts; however, demographic trends typically take decades, or even multiple decades to fully play out. We as investors, must make decisions in real time and do not have the luxury of waiting for the long arc of history to materialize.
Thus, the important question for investors is how long must we wait? When is the right time to make investment decisions based on looming and seemingly obvious demographic changes? You can be right about the long-term effects of demographics and still never profit from your correct analysis. Some investment firms use demographics as a theme for investing, and while Concord doesn’t paint itself into any one corner, demographic trends certainly factor into our macroeconomic outlook, our sector overweight and underweights, and ultimately, the securities that end up in client portfolios. Again, not every investment has to fit neatly into that framework, but the ones that end up being “obvious in hindsight” often have a demographic element.
In my 2023 and 2024 Forecasts, I mentioned that China has yet to emerge from its COVID-19-induced slump and that we were avoiding direct and indirect investment in China as much as possible. Two factors beyond the pandemic have furthered the slump. First, the Xi regime has embarked on a campaign to put “new thought” at the forefront of all activities of China. The Chinese Communist Party under Xi’s control dismissed many of the leaders of the previous generation that saw China rise technologically and in GDP. Xi aims to return to his version of Mao’s “Common Prosperity.” If history is any guide, a renewed focus on communism rather than capitalism will not end well. Pithily, communists don’t seem to care very much for personal property rights — especially those of foreigners. At Concord, one of our tenets of investing in foreign countries is that they respect both capitalism and the rule of law.
Beyond these overtly political issues, China has another issue that has been long coming to the forefront, and one known well to humanitarians. The “One Child Policy” limited Chinese families to one child for each household and remained in place from 1980 to 2016.1 Further, the ratio of males to females in China is about 104:100 — too many boys.2 While it is unknown why this disparity exists, there are potentially sinister implications. This imbalance and policy have undoubtedly led to a precipitously declining fertility rate well below the replacement rate. Rather than growing, China may shrink over the coming decades. Population growth is a key contributor to GDP growth. Organic population growth or growth through immigration is preferable to population decline and emigration.
China generally presents problems for investors seeking growth opportunities. Our decision to avoid Chinese stocks and bonds was based primarily on skepticism about the country’s economic emergence from COVID-19, issues with overbuilding in the property sector, and bad loans in the banking sector combined with the whole “communism thing.” Demographics is the proverbial nail in the coffin — something we understood should come eventually, but its market impact couldn’t be timed.
The United States, on the other hand, with a growing population, showed strong GDP growth in 2023. As a result, and because of sustained inflation, the Federal Reserve decided to keep its short-term interest rate target at 5.25% at its January meeting. The Federal Reserve has a dual mandate of stable prices and full employment. Inflation is still the main concern in 2024. Chairman Powell has room to maneuver on the employment front partly due to a growing population, which increases aggregate demand, further fueling job growth, household formation, and opportunity.
The chart below shows Continuing Jobless Claims in the United States. While the unemployment rate and survey methodology have flaws, jobless claims are tougher to mistake. An unemployment claim is created when an out-of-work person goes to their state unemployment agency and files a claim for unemployment benefits — money talks. Approximately 1.9 million Americans were out of work as of the week of January 20, 2024. While the number of jobless claims is rising, it is still at a level far below any that would be considered recessionary.

U.S. Continuing Jobless Claims

Source: U.S. Department of Labor, Bloomberg Finance L.P.

The raw number of unemployed workers is only half the story. There are more Americans today than there were last year. There were more last year than the year before that, and so on. The chart below shows the working-age population of the United States between the ages of 15 and 64.

U.S. Working Age Population (Ages 15 to 64)

Source: OECD, Bloomberg Finance L.P.

Positive demographics push the economy forward even during tough stretches. Population growth puts upward pressure on aggregate demand. Not only is the population growing, but household formation is also trending higher. Household formation means home purchases, loans, goods and services, automobile purchases, and babies. A growing economy means more consumers demanding more goods and services. A capitalist economy with abundant natural, capital and human resources, like the United States, can provide those goods and services better, faster, and cheaper. American stocks enable participation in that growth.
The return of household formation was part of the decision to allocate assets to homebuilder stocks in 2023. While not the entire thesis, demographic trends were a tailwind, not a headwind. Household formation alone is not enough to make homebuilders sustainably profitable. Many large homebuilders changed how they do business after the 2008-10 experience. The ones we own have stronger balance sheets. They do not engage heavily in land speculation. They are careful not to overbuild. They have a new buyer – large institutional single-family landlords. Importantly, they were cheap on an absolute and relative basis. A new generation of homebuyers looking to move out of their parents’ basement (joking aside) formed a demographic tailwind for an investment thesis but was not a key dependency.
The Federal Reserve has an intermediate-term view. Demographics may be an interesting topic for a research paper or an entertaining lecture, but not pertinent to policymaking quarter to quarter. At its January meeting, Chairman Powell clarified that the market was getting ahead of itself concerning falling interest rates. While the inflation data is coming down, long-term inflation is still high. It’s an election year, and this is a highly political and politicized Fed despite the “independence” talk. We expect the Fed to take more time to lower interest rates, likely slower than the market expects. First, they don’t want to give inflation a chance to return. Second, because the economy is still strong and unemployment is low. Third, the economy may structurally adapt to the current level of interest rates without significant cost to growth, something I think is not priced into interest rates.
During our Forecast event, I made what some clients might have thought of as a contradictory statement. I said that I thought decreasing inflation would likely lead to lower rates in 2024, but that our base case was still for higher rates over the next five years. While the Federal Reserve can control rates at the short end of the curve, its yield curve control and quantitative easing experiment is over. Zero percent interest rates distort financial markets and prices. Artificially low interest rates encourage reckless behavior by consumers, businesses, and bankers—especially bad bankers.
Treasury borrowing will increase in 2024 above 2023 levels, and unless changes are made, the debt will grow larger and larger. Just as demographics impact GDP growth – we just don’t know when – growing debts to an unsustainable level will eventually result in higher long-term interest rates. We had a 40-year trend where long-term interest rates declined. That ended in April 2020 with the 30-year U.S. Treasury Bond yield to maturity at 0.98%.
Whether it is inflation sustained above the Fed’s target, the weight of too much debt chasing too few lenders, or just normalization of the yield curve because the U.S. economy is strong enough to handle higher interest rates, our opinion is that longer-term interest rates are more likely to be higher in the future than lower. But even if we are wrong, we take a mathematical approach to risk-taking in bonds.
If we were to buy the 10-year U.S. Treasury Note today (January 31, 2024), we would buy it with a yield to maturity of approximately 3.89%. If interest rates went down 100 basis points (1 percentage point), our total return for the year would be 11.7%. Not too shabby. But if interest rates went up 100 basis points, our total return for the year would be -3.3%. We’d lose money.
On a risk/reward basis, consider the relative performance of buying 2-year Notes instead. While we think rates are more likely to rise, if we are wrong and interest rates decline by 100 basis points, an investor in the 2-year Treasury Note would earn 5.3%, and if interest rates rose 100 basis points, the “downside” would be to earn 3.4%. If these scenarios (2-year or 10-year) were a coin flip, buying the 10-year note has a 4.2% expected return, and the 2-year note has a 4.3% expected return.
Buyers of longer-term bonds seek protection from events that form blocks in the wall of worry. These events though tend to be short-lived or never happen at all. Holding a 10-year bond because of a six-month worry seems illogical for long-term investors like us. Concord’s base case is that the economy will continue to grow in 2024 and beyond. Look beyond the wall of worry; the United States is one of the strongest economies in the world. And demographic trends are going our way, too.

Author

Gary Aiken, Chief Investment Officer

Gary Aiken is the Chief Investment Officer for Concord Asset Management and is responsible for macroeconomic analysis, asset allocation, and security selection, as well as trading and investment operations.

Gary has over 21 years of investment experience and holds an undergraduate degree in economics from the University of Maryland and an MBA from The George Washington University School of Business.

—

Sources:

1Pletcher, Kenneth. Encyclopedia Britannica, January 3, 2024.
2Minzer, Carl. Council on Foreign Relations, January 26, 2024.

Disclosures: Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Concord Asset Management, or any non-investment related content, made reference to directly or indirectly in this article will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this article serves as the receipt of, or as a substitute for, personalized investment advice from Concord Asset Management. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. Concord Asset Management is neither a law firm, nor a certified public accounting firm, and no portion of this content should be construed as legal or accounting advice. A copy of Concord Asset Management’ current written disclosure Brochure discussing our advisory services and fees is available upon request or at https://concordassetmgmt.com/. Please Note: If you are a Concord Asset Management or Concord Wealth Partners client, please remember to contact the firm in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing, evaluating, and/or revising our previous recommendations and/or services, or if you would like to impose, add, or to modify any reasonable restrictions to our investment advisory services. Concord Asset Management and Concord Wealth Partners shall continue to rely on the accuracy of information that you have provided. Please Note: If you are a Concord Asset Management or Concord Wealth Partners client, please advise us if you have not been receiving account statements (at least quarterly) from the account custodian.

Weekly Market Insights – Monday, February 5, 2024

Fed Keeps Rates Steady as Job Market Exceeds Expectations:

Stocks surged early last week, pushing the S&P 500 to a new record high. However, many investors were disappointed on Wednesday when the Federal Reserve decided to maintain interest rates instead of beginning cuts. Markets were able to rally later in the week as a strong January jobs report helped bolster confidence in a robust economy.

Stocks At New Highs

At the beginning of the week, highly-anticipated fourth-quarter corporate updates from tech companies and the Federal Reserve’s two-day policy meeting propelled stocks higher, leading to the S&P 500 Index reaching a new record high on Monday.

Source: Charles Schwab & Co., Inc

The market remained relatively stable for the rest of the week until Wednesday, when the Fed announced its decision to maintain interest rates within the 5.25-5.50% target range. The Federal Open Market Committee’s (FOMC) news unsettled investors, who anticipated that rates would remain unchanged but expected more specific guidance on the Fed’s plan to lower interest rates.1
On Friday, the job report for January revealed the addition of 353,000 new jobs, surpassing the forecast of 185,000. This strong report did not negatively impact the markets. Instead, investors interpreted it as confirmation of a robust economy.2

Fed’s Mixed Signals

The Fed’s decision to keep rates steady left some investors disappointed, as they had been hoping for indications of rate cuts in the coming months. This led to a decline in stock prices on Wednesday, with increased selling towards the end of the trading day.

Source: Bloomberg Finance L.P.

The Wall Street Journal’s headline after the FOMC meeting on Wednesday suggested that rate cuts were possible but not expected immediately. The FOMC’s policy language indicated a subtle shift from considering rate cuts to proposing they could be possible unless inflation became a concern.3

This Week: Key Economic Data

Source: Bloomberg Finance L.P.

This Week: Companies Reporting Earnings

Source: EarningsWhispers

At Concord Asset Management, we design portfolios for the long run, with the ability to navigate various market cycles. However, you can have confidence that we are monitoring these market-moving events, and we will make reasonable, tactical adjustments as necessary.

Author

Gary Aiken
Chief Investment Officer
Concord Asset Management
—

Footnotes and Sources

1CNBC.com, January 29, 2024
2The Wall Street Journal, January 31, 2024
3CNBC.com, February 2, 2024

The companies mentioned are for informational purposes only. It should not be considered a solicitation for the purchase or sale of the securities. Investing involves risks, and investment decisions should be based on your own goals, time horizon, and tolerance for risk. The return and principal value of investments will fluctuate as market conditions change. When sold, investments may be worth more or less than their original cost. The forecasts or forward-looking statements are based on assumptions, may not materialize, and are subject to revision without notice. The market indexes discussed are unmanaged and generally considered representative of their respective markets. Index performance is not indicative of the past performance of a particular investment. Indexes do not incur management fees, costs, and expenses. Individuals cannot directly invest in unmanaged indexes. Past performance does not guarantee future results. The Dow Jones Industrial Average is an unmanaged index that is generally considered representative of large-capitalization companies on the U.S. stock market. Nasdaq Composite is an index of the common stocks and similar securities listed on the NASDAQ stock market and is considered a broad indicator of the performance of technology and growth companies. The MSCI EAFE Index was created by Morgan Stanley Capital International (MSCI) and serves as a benchmark of the performance of major international equity markets, as represented by 21 major MSCI indexes from Europe, Australia, and Southeast Asia. The S&P 500 Composite Index is an unmanaged group of securities that are considered to be representative of the stock market in general. U.S. Treasury Notes are guaranteed by the federal government as to the timely payment of principal and interest. However, if you sell a Treasury Note prior to maturity, it may be worth more or less than the original price paid. Fixed income investments are subject to various risks, including changes in interest rates, credit quality, inflation risk, market valuations, prepayments, corporate events, tax ramifications, and other factors. International investments carry additional risks, which include differences in financial reporting standards, currency exchange rates, political risks unique to a specific country, foreign taxes and regulations, and the potential for illiquid markets. These factors may result in greater share price volatility. Please consult your financial professional for additional information. This content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and they should not be considered a solicitation for the purchase or sale of any security.

Concord Asset Management, LLC (“CAM”) is a registered investment advisor with the Securities and Exchange Commission. CAM is affiliated, and shares advisory personnel with Concord Wealth Partners (“CWP”). CAM offers advisory services, including customized sub-advisory solutions, to other registered investment advisers and/or institutional managers, including its affiliate, Concord Wealth Partners, LLC. CAM’s investment advisory services are only offered to current or prospective clients where CAM and its investment adviser representatives are properly licensed or exempt from licensure.

The information provided in this commentary is for educational and informational purposes only and does not constitute investment advice and it should not be relied on as such. It should not be considered a solicitation to buy or an offer to sell a security. It does not take into account any investor’s particular investment objectives, strategies, tax status, or investment horizon. You should consult your attorney or tax advisor.

The views expressed in this commentary are subject to change based on the market and other conditions. These documents may contain certain statements that may be deemed forward‐looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected. Any projections, market outlooks, or estimates are based upon certain assumptions and should not be construed as indicative of actual events that will occur.

Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by CAM or its affiliates, or any non-investment related content, made reference to directly or indirectly in this newsletter will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this newsletter serves as the receipt of, or as a substitute for, personalized investment advice from CAM or CWP. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. CAM and CWP are neither law firms nor certified public accounting firms, and no portion of the newsletter content should be construed as legal or accounting advice. A copy of CAM’s current written disclosure Brochure discussing our advisory services and fees is available upon request or at https://concordassetmgmt.com/

Please Note: If you are a CAM or CWP client, please remember to contact us, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services, or if you would like to impose, add, or to modify any reasonable restrictions to our investment advisory services. CAM and CWP shall continue to rely on the accuracy of the information that you have provided. Please Note: If you are a CAM or CWP client, strong>please advise us if you have not been receiving account statements (at least quarterly) from the account custodian.

Weekly Market Insights – Monday, January 29, 2024

Stocks Surge as Big Tech Excitement Continues:

Stocks maintained their upward trajectory last week, propelled by the ongoing excitement surrounding big tech. Positive economic reports further fueled investor confidence in the Federal Reserve’s ability to pull off a successful soft landing.

Stocks Power Ahead

Big tech was back last week, pushing the Dow and the S&P 500 to new highs early in the week as markets resumed the late Q4 rally.
The so-called “Magnificent Seven” stocks—comprising 28% of the S&P 500 Index—resumed their pole position at the head of the pack as investors maintained their artificial intelligence (AI)-related bullishness and rewarded widespread cost-cutting at many tech giants. While the rally fizzled on Friday, the week’s gains were slow but steady.1,2,3

Source: Charles Schwab & Co., Inc

The big economic news last week was better-than-expected economic growth and inflation news. Real Gross Domestic Product grew at a 3.3% annualized clip in Q4 2023, ahead of Wall Street consensus expectations of 2%.
The Personal Consumption Expenditures (PCE) Index, one of the Fed’s most favored inflation gauges, showed core inflation (excluding food and energy) cooled in December, with an annualized rate of 2.9%, beating consensus expectations. Core inflation was 3.2% on an annualized basis—its lowest level since March 2021. While the inflation update didn’t move markets much, it helped validate investors’ optimism that Fed policy has maintained economic growth while bringing inflation down.4

Source: Charles Schwab & Co., Inc

Earnings Season Feeds FOMO

The market digested Q4 earnings news from some of the largest companies, with enthusiasm feeling like FOMO. The “fear of missing out” drove much investor sentiment and seemed to build market momentum.
While the enthusiasm for AI continues to be one driver of technology stock prices, the spotlight last week was on layoffs. Over 23,000 workers at 85 tech companies have lost their jobs this month. The market appears to be rewarding the cost-cutting measures, with many tech giants repositioning themselves with AI in mind, and some analysts inferring that this emphasis on efficiency may encourage investors.5,6

This Week: Key Economic Data

Source: Bloomberg Finance L.P.

This Week: Companies Reporting Earnings

Source: EarningsWhispers

At Concord Asset Management, we design portfolios for the long run, with the ability to navigate various market cycles. However, you can have confidence that we are monitoring these market-moving events, and we will make reasonable, tactical adjustments as necessary.

Author

Gary Aiken
Chief Investment Officer
Concord Asset Management
—

Footnotes and Sources

1The Wall Street Journal, January 22, 2024
2CNBC.com, January 22, 2024
3The Wall Street Journal, January 25, 2024
4CNBC.com, January 25, 2024
5Slickcharts.com, January 26, 2024
6CNBC.com, January 26, 2024

The companies mentioned are for informational purposes only. It should not be considered a solicitation for the purchase or sale of the securities. Investing involves risks, and investment decisions should be based on your own goals, time horizon, and tolerance for risk. The return and principal value of investments will fluctuate as market conditions change. When sold, investments may be worth more or less than their original cost. The forecasts or forward-looking statements are based on assumptions, may not materialize, and are subject to revision without notice. The market indexes discussed are unmanaged and generally considered representative of their respective markets. Index performance is not indicative of the past performance of a particular investment. Indexes do not incur management fees, costs, and expenses. Individuals cannot directly invest in unmanaged indexes. Past performance does not guarantee future results. The Dow Jones Industrial Average is an unmanaged index that is generally considered representative of large-capitalization companies on the U.S. stock market. Nasdaq Composite is an index of the common stocks and similar securities listed on the NASDAQ stock market and is considered a broad indicator of the performance of technology and growth companies. The MSCI EAFE Index was created by Morgan Stanley Capital International (MSCI) and serves as a benchmark of the performance of major international equity markets, as represented by 21 major MSCI indexes from Europe, Australia, and Southeast Asia. The S&P 500 Composite Index is an unmanaged group of securities that are considered to be representative of the stock market in general. U.S. Treasury Notes are guaranteed by the federal government as to the timely payment of principal and interest. However, if you sell a Treasury Note prior to maturity, it may be worth more or less than the original price paid. Fixed income investments are subject to various risks, including changes in interest rates, credit quality, inflation risk, market valuations, prepayments, corporate events, tax ramifications, and other factors. International investments carry additional risks, which include differences in financial reporting standards, currency exchange rates, political risks unique to a specific country, foreign taxes and regulations, and the potential for illiquid markets. These factors may result in greater share price volatility. Please consult your financial professional for additional information. This content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and they should not be considered a solicitation for the purchase or sale of any security.

Concord Asset Management, LLC (“CAM”) is a registered investment advisor with the Securities and Exchange Commission. CAM is affiliated, and shares advisory personnel with Concord Wealth Partners (“CWP”). CAM offers advisory services, including customized sub-advisory solutions, to other registered investment advisers and/or institutional managers, including its affiliate, Concord Wealth Partners, LLC. CAM’s investment advisory services are only offered to current or prospective clients where CAM and its investment adviser representatives are properly licensed or exempt from licensure.

The information provided in this commentary is for educational and informational purposes only and does not constitute investment advice and it should not be relied on as such. It should not be considered a solicitation to buy or an offer to sell a security. It does not take into account any investor’s particular investment objectives, strategies, tax status, or investment horizon. You should consult your attorney or tax advisor.

The views expressed in this commentary are subject to change based on the market and other conditions. These documents may contain certain statements that may be deemed forward‐looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected. Any projections, market outlooks, or estimates are based upon certain assumptions and should not be construed as indicative of actual events that will occur.

Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by CAM or its affiliates, or any non-investment related content, made reference to directly or indirectly in this newsletter will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this newsletter serves as the receipt of, or as a substitute for, personalized investment advice from CAM or CWP. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. CAM and CWP are neither law firms nor certified public accounting firms, and no portion of the newsletter content should be construed as legal or accounting advice. A copy of CAM’s current written disclosure Brochure discussing our advisory services and fees is available upon request or at https://concordassetmgmt.com/

Please Note: If you are a CAM or CWP client, please remember to contact us, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services, or if you would like to impose, add, or to modify any reasonable restrictions to our investment advisory services. CAM and CWP shall continue to rely on the accuracy of the information that you have provided. Please Note: If you are a CAM or CWP client, strong>please advise us if you have not been receiving account statements (at least quarterly) from the account custodian.

Weekly Market Insights – Monday, January 22, 2024

Big Tech Stocks Drive Market Rally Amid Economic Uncertainty:

Stocks finished last week on a positive note, driven by the strong performance of big tech companies. However, there still remains uncertainty regarding how ongoing economic strength will impact the Fed’s rate decision.

Stocks Dip, Then Rally

Stock prices dropped early in the week before rising to new highs as the week ended. The four-day trading week began with more Q4 bank earnings, which disappointed. The news pushed the financial sector and the broader S&P 500 Index lower on Tuesday. The yield on the 10-year Treasury climbed after a Fed Governor said the central bank may adjust rates as much as markets expect. That and a stronger-than-expected holiday retail sales report put pressure on stock prices.1,2
Tech stocks drove the Thursday rally, with the S&P and Nasdaq recouping their 2024 losses. Stocks continued their tech-led climb on Friday, with the S&P 500 rising to an all-time high—its first record close in over two years. The Nasdaq gained 1.70% on Friday, capping a solid week for the tech-heavy index.

Source: Charles Schwab & Co., Inc

Navigating the Middle

Sentiment see-sawed last week as investors tried to anticipate the Fed’s next move. The week was full of economic news that suggested continued resilience in the economy, which may add complexity to the Fed’s next decision.
December retail sales came in strong, +0.6% for the month, besting economists’ expectations of +0.4%. November and December combined to depict a robust holiday shopping season. Unemployment dipped unexpectedly for the second week of January–a sign of a resilient U.S. labor market. That labor news and hotter-than-expected housing starts pushed the yield on the 10-year Treasury to 4.14%, its highest level in more than a month.3,4,5,6

Source: Bloomberg Finance L.P.

This Week: Companies Reporting Earnings

Source: EarningsWhispers

At Concord Asset Management, we design portfolios for the long run, with the ability to navigate various market cycles. However, you can have confidence that we are monitoring these market-moving events, and we will make reasonable, tactical adjustments as necessary.

Author

Gary Aiken
Chief Investment Officer
Concord Asset Management
—

Footnotes and Sources

1CNBC.com, January 16, 2024
2CNBC.com, January 17, 2024
3CNBC.com, January 16, 2024
4MarketWatch.com, January 17, 2024
5CNBC.com, January 18, 2024
6The Wall Street Journal, January 19, 2024

The companies mentioned are for informational purposes only. It should not be considered a solicitation for the purchase or sale of the securities. Investing involves risks, and investment decisions should be based on your own goals, time horizon, and tolerance for risk. The return and principal value of investments will fluctuate as market conditions change. When sold, investments may be worth more or less than their original cost. The forecasts or forward-looking statements are based on assumptions, may not materialize, and are subject to revision without notice. The market indexes discussed are unmanaged and generally considered representative of their respective markets. Index performance is not indicative of the past performance of a particular investment. Indexes do not incur management fees, costs, and expenses. Individuals cannot directly invest in unmanaged indexes. Past performance does not guarantee future results. The Dow Jones Industrial Average is an unmanaged index that is generally considered representative of large-capitalization companies on the U.S. stock market. Nasdaq Composite is an index of the common stocks and similar securities listed on the NASDAQ stock market and is considered a broad indicator of the performance of technology and growth companies. The MSCI EAFE Index was created by Morgan Stanley Capital International (MSCI) and serves as a benchmark of the performance of major international equity markets, as represented by 21 major MSCI indexes from Europe, Australia, and Southeast Asia. The S&P 500 Composite Index is an unmanaged group of securities that are considered to be representative of the stock market in general. U.S. Treasury Notes are guaranteed by the federal government as to the timely payment of principal and interest. However, if you sell a Treasury Note prior to maturity, it may be worth more or less than the original price paid. Fixed income investments are subject to various risks, including changes in interest rates, credit quality, inflation risk, market valuations, prepayments, corporate events, tax ramifications, and other factors. International investments carry additional risks, which include differences in financial reporting standards, currency exchange rates, political risks unique to a specific country, foreign taxes and regulations, and the potential for illiquid markets. These factors may result in greater share price volatility. Please consult your financial professional for additional information. This content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and they should not be considered a solicitation for the purchase or sale of any security.

Concord Asset Management, LLC (“CAM”) is a registered investment advisor with the Securities and Exchange Commission. CAM is affiliated, and shares advisory personnel with Concord Wealth Partners (“CWP”). CAM offers advisory services, including customized sub-advisory solutions, to other registered investment advisers and/or institutional managers, including its affiliate, Concord Wealth Partners, LLC. CAM’s investment advisory services are only offered to current or prospective clients where CAM and its investment adviser representatives are properly licensed or exempt from licensure.

The information provided in this commentary is for educational and informational purposes only and does not constitute investment advice and it should not be relied on as such. It should not be considered a solicitation to buy or an offer to sell a security. It does not take into account any investor’s particular investment objectives, strategies, tax status, or investment horizon. You should consult your attorney or tax advisor.

The views expressed in this commentary are subject to change based on the market and other conditions. These documents may contain certain statements that may be deemed forward‐looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected. Any projections, market outlooks, or estimates are based upon certain assumptions and should not be construed as indicative of actual events that will occur.

Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by CAM or its affiliates, or any non-investment related content, made reference to directly or indirectly in this newsletter will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this newsletter serves as the receipt of, or as a substitute for, personalized investment advice from CAM or CWP. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. CAM and CWP are neither law firms nor certified public accounting firms, and no portion of the newsletter content should be construed as legal or accounting advice. A copy of CAM’s current written disclosure Brochure discussing our advisory services and fees is available upon request or at https://concordassetmgmt.com/

Please Note: If you are a CAM or CWP client, please remember to contact us, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services, or if you would like to impose, add, or to modify any reasonable restrictions to our investment advisory services. CAM and CWP shall continue to rely on the accuracy of the information that you have provided. Please Note: If you are a CAM or CWP client, strong>please advise us if you have not been receiving account statements (at least quarterly) from the account custodian.

Weekly Market Insights – Monday, January 8, 2024

Stocks Retreat Amid New Year Blues:

Stocks struggled during the opening trading week of 2024, a notable setback following a strong conclusion to last year. Investors have questioned the reliability of signals from the Federal Reserve and continue to express unease about lingering inflation.

A Volatile Start

Stocks got off to a rough first week of the new year, with tech names leading the week’s decline. Several market observers called it the “reverse Goldilocks” effect, where the market decided investors were getting a little too excited over the prospect of a Fed rate cut.
Stocks bounced up and down each of the four trading days but ended each one down—except Friday, when the Dow Industrials, Nasdaq Composite, and S&P 500 all ended the day in the green when jobs data helped soften the week’s slide.1,2

Source: Charles Schwab & Co., Inc

All About the Fed

On Wednesday, manufacturing news came in better than expected, lifting markets until the December Federal Open Market Committee meeting minutes were released, revealing that the Fed members had discussed rate cuts for 2024 but in no specific terms.
Jobs and services sector news painted a better picture of the economy on Thursday, but as the 10-year Treasury hit 4%, stock prices responded negatively.

Jobs Data in Focus

Finally, employment data helped buffer the week on Friday, as employers added 216,000 new jobs in December, besting estimates from economists and surpassing the 173,000 jobs added in November. News of unemployment remaining steady at 3.7% also helped sentiment.3,4

This Week: Key Economic Data

Source: Bloomberg Finance L.P.

This Week: Companies Reporting Earnings

Source: EarningsWhispers

At Concord Asset Management, we design portfolios for the long run, with the ability to navigate various market cycles. However, you can have confidence that we are monitoring these market-moving events, and we will make reasonable, tactical adjustments as necessary.

Author

Gary Aiken
Chief Investment Officer
Concord Asset Management
—

Footnotes and Sources

1The Wall Street Journal, January 5, 2024
2The Wall Street Journal, January 5, 2024
3The Wall Street Journal, January 5, 2024
4The Wall Street Journal, January 5, 2024

The companies mentioned are for informational purposes only. It should not be considered a solicitation for the purchase or sale of the securities. Investing involves risks, and investment decisions should be based on your own goals, time horizon, and tolerance for risk. The return and principal value of investments will fluctuate as market conditions change. When sold, investments may be worth more or less than their original cost. The forecasts or forward-looking statements are based on assumptions, may not materialize, and are subject to revision without notice. The market indexes discussed are unmanaged and generally considered representative of their respective markets. Index performance is not indicative of the past performance of a particular investment. Indexes do not incur management fees, costs, and expenses. Individuals cannot directly invest in unmanaged indexes. Past performance does not guarantee future results. The Dow Jones Industrial Average is an unmanaged index that is generally considered representative of large-capitalization companies on the U.S. stock market. Nasdaq Composite is an index of the common stocks and similar securities listed on the NASDAQ stock market and is considered a broad indicator of the performance of technology and growth companies. The MSCI EAFE Index was created by Morgan Stanley Capital International (MSCI) and serves as a benchmark of the performance of major international equity markets, as represented by 21 major MSCI indexes from Europe, Australia, and Southeast Asia. The S&P 500 Composite Index is an unmanaged group of securities that are considered to be representative of the stock market in general. U.S. Treasury Notes are guaranteed by the federal government as to the timely payment of principal and interest. However, if you sell a Treasury Note prior to maturity, it may be worth more or less than the original price paid. Fixed income investments are subject to various risks, including changes in interest rates, credit quality, inflation risk, market valuations, prepayments, corporate events, tax ramifications, and other factors. International investments carry additional risks, which include differences in financial reporting standards, currency exchange rates, political risks unique to a specific country, foreign taxes and regulations, and the potential for illiquid markets. These factors may result in greater share price volatility. Please consult your financial professional for additional information. This content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and they should not be considered a solicitation for the purchase or sale of any security.

Concord Asset Management, LLC (“CAM”) is a registered investment advisor with the Securities and Exchange Commission. CAM is affiliated, and shares advisory personnel with Concord Wealth Partners (“CWP”). CAM offers advisory services, including customized sub-advisory solutions, to other registered investment advisers and/or institutional managers, including its affiliate, Concord Wealth Partners, LLC. CAM’s investment advisory services are only offered to current or prospective clients where CAM and its investment adviser representatives are properly licensed or exempt from licensure.

The information provided in this commentary is for educational and informational purposes only and does not constitute investment advice and it should not be relied on as such. It should not be considered a solicitation to buy or an offer to sell a security. It does not take into account any investor’s particular investment objectives, strategies, tax status, or investment horizon. You should consult your attorney or tax advisor.

The views expressed in this commentary are subject to change based on the market and other conditions. These documents may contain certain statements that may be deemed forward‐looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected. Any projections, market outlooks, or estimates are based upon certain assumptions and should not be construed as indicative of actual events that will occur.

Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by CAM or its affiliates, or any non-investment related content, made reference to directly or indirectly in this newsletter will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this newsletter serves as the receipt of, or as a substitute for, personalized investment advice from CAM or CWP. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. CAM and CWP are neither law firms nor certified public accounting firms, and no portion of the newsletter content should be construed as legal or accounting advice. A copy of CAM’s current written disclosure Brochure discussing our advisory services and fees is available upon request or at https://concordassetmgmt.com/

Please Note: If you are a CAM or CWP client, please remember to contact us, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services, or if you would like to impose, add, or to modify any reasonable restrictions to our investment advisory services. CAM and CWP shall continue to rely on the accuracy of the information that you have provided. Please Note: If you are a CAM or CWP client, strong>please advise us if you have not been receiving account statements (at least quarterly) from the account custodian.

Weekly Market Insights – Tuesday, December 26, 2023

Investor Optimism Boosts Stocks for the Holidays:

Investor enthusiasm and fears of missing out on potential future gains helped propel stocks higher in the last full week of trading before the holiday. Market participants eagerly embraced the opportunity to capitalize on recent sentiment and position themselves for potential returns in the coming year.
The Dow Jones Industrial Average added 0.22%, while the Standard & Poor’s 500 gained 0.75%. The Nasdaq Composite index advanced 1.21% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, added 0.51%.1

Source: Bloomberg Finance, L.P.

Source: Charles Schwab & Co., Inc

Stocks Build on Gains

The current market narrative of declining inflation, easing interest rates, and better earnings ahead continued to fuel stock market gains, with some of the year’s laggards, such as smaller cap stocks and energy names, leading the way.
While the stock market has repeatedly seen gains gather steam in the final trading hours, a late-day sell-off on Wednesday unnerved investors. While it’s difficult to know precisely why, the sharp decline may have resulted from profit-taking and low trading volumes, which can result in unexpected volatility or other technical reasons. Whatever the case, stocks rebounded nicely the following day and Friday.

Housing Revival?

The housing market struggled this year amid higher mortgage rates and rising home prices. Last week, several housing reports suggested the housing market may be improving.
New home construction rose 14.8% in November, reaching levels not seen since May, while existing home sales rebounded 0.8%, reversing five straight months of declines. Existing home sales have been hurt by low inventory since many homeowners with low-rate mortgages are hesitant to move and take on a higher-rate mortgage. This logjam may loosen as 30-year mortgage rates fell from 7.79% at the end of October to 6.95% in mid-November.2,3
New home sales disappointed, however, falling 12.2%, though they came in 1.4% higher from November a year ago.4

This Week: Key Economic Data

Source: Bloomberg Finance L.P.

At Concord Asset Management, we design portfolios for the long run, with the ability to navigate various market cycles. However, you can have confidence that we are monitoring these market-moving events, and we will make reasonable, tactical adjustments as necessary.

Author

Gary Aiken
Chief Investment Officer
Concord Asset Management
—

Footnotes and Sources

1The Wall Street Journal, December 22, 2023
2MarketWatch, December 19, 2023
3Fox Business, December 20, 2023
4U.S. Census Bureau, December 22, 2023

The companies mentioned are for informational purposes only. It should not be considered a solicitation for the purchase or sale of the securities. Investing involves risks, and investment decisions should be based on your own goals, time horizon, and tolerance for risk. The return and principal value of investments will fluctuate as market conditions change. When sold, investments may be worth more or less than their original cost. The forecasts or forward-looking statements are based on assumptions, may not materialize, and are subject to revision without notice. The market indexes discussed are unmanaged and generally considered representative of their respective markets. Index performance is not indicative of the past performance of a particular investment. Indexes do not incur management fees, costs, and expenses. Individuals cannot directly invest in unmanaged indexes. Past performance does not guarantee future results. The Dow Jones Industrial Average is an unmanaged index that is generally considered representative of large-capitalization companies on the U.S. stock market. Nasdaq Composite is an index of the common stocks and similar securities listed on the NASDAQ stock market and is considered a broad indicator of the performance of technology and growth companies. The MSCI EAFE Index was created by Morgan Stanley Capital International (MSCI) and serves as a benchmark of the performance of major international equity markets, as represented by 21 major MSCI indexes from Europe, Australia, and Southeast Asia. The S&P 500 Composite Index is an unmanaged group of securities that are considered to be representative of the stock market in general. U.S. Treasury Notes are guaranteed by the federal government as to the timely payment of principal and interest. However, if you sell a Treasury Note prior to maturity, it may be worth more or less than the original price paid. Fixed income investments are subject to various risks, including changes in interest rates, credit quality, inflation risk, market valuations, prepayments, corporate events, tax ramifications, and other factors. International investments carry additional risks, which include differences in financial reporting standards, currency exchange rates, political risks unique to a specific country, foreign taxes and regulations, and the potential for illiquid markets. These factors may result in greater share price volatility. Please consult your financial professional for additional information. This content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and they should not be considered a solicitation for the purchase or sale of any security.

Concord Asset Management, LLC (“CAM”) is a registered investment advisor with the Securities and Exchange Commission. CAM is affiliated, and shares advisory personnel with Concord Wealth Partners (“CWP”). CAM offers advisory services, including customized sub-advisory solutions, to other registered investment advisers and/or institutional managers, including its affiliate, Concord Wealth Partners, LLC. CAM’s investment advisory services are only offered to current or prospective clients where CAM and its investment adviser representatives are properly licensed or exempt from licensure.

The information provided in this commentary is for educational and informational purposes only and does not constitute investment advice and it should not be relied on as such. It should not be considered a solicitation to buy or an offer to sell a security. It does not take into account any investor’s particular investment objectives, strategies, tax status, or investment horizon. You should consult your attorney or tax advisor.

The views expressed in this commentary are subject to change based on the market and other conditions. These documents may contain certain statements that may be deemed forward‐looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected. Any projections, market outlooks, or estimates are based upon certain assumptions and should not be construed as indicative of actual events that will occur.

Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by CAM or its affiliates, or any non-investment related content, made reference to directly or indirectly in this newsletter will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this newsletter serves as the receipt of, or as a substitute for, personalized investment advice from CAM or CWP. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. CAM and CWP are neither law firms nor certified public accounting firms, and no portion of the newsletter content should be construed as legal or accounting advice. A copy of CAM’s current written disclosure Brochure discussing our advisory services and fees is available upon request or at https://concordassetmgmt.com/

Please Note: If you are a CAM or CWP client, please remember to contact us, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services, or if you would like to impose, add, or to modify any reasonable restrictions to our investment advisory services. CAM and CWP shall continue to rely on the accuracy of the information that you have provided. Please Note: If you are a CAM or CWP client, strong>please advise us if you have not been receiving account statements (at least quarterly) from the account custodian.

Weekly Market Insights – Monday, December 18, 2023

Stocks Continue Year-End Rally on Fed and Inflation News:

Markets reacted positively last week as investors welcomed news of cooling inflation and the possibility of interest rate cuts in the upcoming year. These developments helped further fuel the ongoing year-end rally, contributing to overall gains across various sectors.
The Dow Jones Industrial Average rose 2.92%, while the Standard & Poor’s 500 gained 2.50%. The Nasdaq Composite index picked up 2.85% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, tacked on 2.75%.1

Source: Charles Schwab & Co, Inc.

Rally Continues

Stocks gathered momentum last week after upbeat news from two key inflation reports. But the outcome of the Federal Open Market Committee (FOMC) meeting on Wednesday powered the week’s advance. The combination of the FOMC signaling rate cuts in 2024 and dovish comments by Fed Chair Powell led to a sharp drop in bond yields and a spike in stock prices, with the Dow Industrials closing above 37,000 and setting an all-time high.2
The rally continued the following day as beneficiaries of lower rates, such as smaller capitalization stocks and real estate, rallied. A solid retail sales number, which reflected a strong consumer and supported the soft landing thesis, also boosted enthusiasm.

Inflation Eases

The anxiously awaited read on November inflation came close to market expectations, with a 0.1% increase over October and a year-over-year increase of 3.1%. Core inflation, which excludes energy and food prices, came in a bit hotter, rising 0.3% month-over-month and 4.0% from a year ago. A 2.3% decline in energy costs helped offset a 2.9% jump in food prices. Shelter prices remained stubbornly high, rising 0.4% from October and 6.5% from last November.3
The inflation news was better on wholesale prices, tracked by the Producer Price Index (PPI). Producer prices were unchanged in November and higher by just 0.9% year-over-year. Excluding energy and food, the monthly increase was also unchanged.4

This Week: Key Economic Data

Source: Bloomberg Finance L.P.

This Week: Companies Reporting Earnings

Source: EarningsWhispers

At Concord Asset Management, we design portfolios for the long run, with the ability to navigate various market cycles. However, you can have confidence that we are monitoring these market-moving events, and we will make reasonable, tactical adjustments as necessary.

Author

Gary Aiken
Chief Investment Officer
Concord Asset Management
—

Footnotes and Sources

1The Wall Street Journal, December 15, 2023
2CNBC, December 13, 2023
3CNBC, December 12, 2023
4CNBC, December 13, 2023

The companies mentioned are for informational purposes only. It should not be considered a solicitation for the purchase or sale of the securities. Investing involves risks, and investment decisions should be based on your own goals, time horizon, and tolerance for risk. The return and principal value of investments will fluctuate as market conditions change. When sold, investments may be worth more or less than their original cost. The forecasts or forward-looking statements are based on assumptions, may not materialize, and are subject to revision without notice. The market indexes discussed are unmanaged and generally considered representative of their respective markets. Index performance is not indicative of the past performance of a particular investment. Indexes do not incur management fees, costs, and expenses. Individuals cannot directly invest in unmanaged indexes. Past performance does not guarantee future results. The Dow Jones Industrial Average is an unmanaged index that is generally considered representative of large-capitalization companies on the U.S. stock market. Nasdaq Composite is an index of the common stocks and similar securities listed on the NASDAQ stock market and is considered a broad indicator of the performance of technology and growth companies. The MSCI EAFE Index was created by Morgan Stanley Capital International (MSCI) and serves as a benchmark of the performance of major international equity markets, as represented by 21 major MSCI indexes from Europe, Australia, and Southeast Asia. The S&P 500 Composite Index is an unmanaged group of securities that are considered to be representative of the stock market in general. U.S. Treasury Notes are guaranteed by the federal government as to the timely payment of principal and interest. However, if you sell a Treasury Note prior to maturity, it may be worth more or less than the original price paid. Fixed income investments are subject to various risks, including changes in interest rates, credit quality, inflation risk, market valuations, prepayments, corporate events, tax ramifications, and other factors. International investments carry additional risks, which include differences in financial reporting standards, currency exchange rates, political risks unique to a specific country, foreign taxes and regulations, and the potential for illiquid markets. These factors may result in greater share price volatility. Please consult your financial professional for additional information. This content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and they should not be considered a solicitation for the purchase or sale of any security.

Concord Asset Management, LLC (“CAM”) is a registered investment advisor with the Securities and Exchange Commission. CAM is affiliated, and shares advisory personnel with Concord Wealth Partners (“CWP”). CAM offers advisory services, including customized sub-advisory solutions, to other registered investment advisers and/or institutional managers, including its affiliate, Concord Wealth Partners, LLC. CAM’s investment advisory services are only offered to current or prospective clients where CAM and its investment adviser representatives are properly licensed or exempt from licensure.

The information provided in this commentary is for educational and informational purposes only and does not constitute investment advice and it should not be relied on as such. It should not be considered a solicitation to buy or an offer to sell a security. It does not take into account any investor’s particular investment objectives, strategies, tax status, or investment horizon. You should consult your attorney or tax advisor.

The views expressed in this commentary are subject to change based on the market and other conditions. These documents may contain certain statements that may be deemed forward‐looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected. Any projections, market outlooks, or estimates are based upon certain assumptions and should not be construed as indicative of actual events that will occur.

Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by CAM or its affiliates, or any non-investment related content, made reference to directly or indirectly in this newsletter will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this newsletter serves as the receipt of, or as a substitute for, personalized investment advice from CAM or CWP. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. CAM and CWP are neither law firms nor certified public accounting firms, and no portion of the newsletter content should be construed as legal or accounting advice. A copy of CAM’s current written disclosure Brochure discussing our advisory services and fees is available upon request or at https://concordassetmgmt.com/

Please Note: If you are a CAM or CWP client, please remember to contact us, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services, or if you would like to impose, add, or to modify any reasonable restrictions to our investment advisory services. CAM and CWP shall continue to rely on the accuracy of the information that you have provided. Please Note: If you are a CAM or CWP client, strong>please advise us if you have not been receiving account statements (at least quarterly) from the account custodian.

Weekly Market Insights – Monday, December 11, 2023

Stocks Rally Late on Increased Productivity and AI Enthusiasm:

A late rally helped propel stocks higher last week, extending November’s gains as markets kicked off the final month of trading in 2023.
The Dow Jones Industrial Average was flat (+0.01%), while the Standard & Poor’s 500 gained 0.21%. The Nasdaq Composite Index also increased by 0.69% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, was up 0.37%.1

Source: Charles Schwab & Co, Inc.

Stocks Extend Gains

The relationship between the bond and stock markets – which pushed stocks higher in November (i.e. falling bond yields, rising stock prices) – disappeared last week, with stocks falling in the first three days of the week despite declining yields. Yields dropped following a weak job openings report, the ADP employment update, and a substantial productivity revision.
On Thursday, investor enthusiasm returned with force on Artificial Intelligence (AI) related news. One AI chip manufacturer announced a new AI chip, followed by a mega-cap tech company unveiling an enhanced version of its AI model for business use. Stocks continued their climb on Friday despite rising yields, as investors viewed a stronger-than-expected employment report as increasing the potential for a soft landing.

Productivity Surges

Higher productivity may be the most effective and preferred way to reduce inflation. Last week’s revised third-quarter productivity report saw an upward revision of the annualized productivity growth from the initial report of 4.7% to 5.2%; this was welcome news on the inflation front and an encouraging development for future corporate profits.2
The 5.2% jump in productivity represented the fastest pace since the third quarter of 2020. The report also showed unit labor costs falling at a 1.2% annualized pace, reflecting a cooling of wage-growth inflationary pressures. Productivity has increased for two straight quarters, potentially allowing the Fed to ease its restrictive monetary policy.3

This Week: Key Economic Data

Source: Bloomberg Finance L.P.

This Week: Companies Reporting Earnings

Source: EarningsWhispers

At Concord Asset Management, we design portfolios for the long run, with the ability to navigate various market cycles. However, you can have confidence that we are monitoring these market-moving events, and we will make reasonable, tactical adjustments as necessary.

Author

Gary Aiken
Chief Investment Officer
Concord Asset Management
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Footnotes and Sources

1The Wall Street Journal, December 8, 2023
2MarketWatch, December 6, 2023
3MarketWatch, December 6, 2023

The companies mentioned are for informational purposes only. It should not be considered a solicitation for the purchase or sale of the securities. Investing involves risks, and investment decisions should be based on your own goals, time horizon, and tolerance for risk. The return and principal value of investments will fluctuate as market conditions change. When sold, investments may be worth more or less than their original cost. The forecasts or forward-looking statements are based on assumptions, may not materialize, and are subject to revision without notice. The market indexes discussed are unmanaged and generally considered representative of their respective markets. Index performance is not indicative of the past performance of a particular investment. Indexes do not incur management fees, costs, and expenses. Individuals cannot directly invest in unmanaged indexes. Past performance does not guarantee future results. The Dow Jones Industrial Average is an unmanaged index that is generally considered representative of large-capitalization companies on the U.S. stock market. Nasdaq Composite is an index of the common stocks and similar securities listed on the NASDAQ stock market and is considered a broad indicator of the performance of technology and growth companies. The MSCI EAFE Index was created by Morgan Stanley Capital International (MSCI) and serves as a benchmark of the performance of major international equity markets, as represented by 21 major MSCI indexes from Europe, Australia, and Southeast Asia. The S&P 500 Composite Index is an unmanaged group of securities that are considered to be representative of the stock market in general. U.S. Treasury Notes are guaranteed by the federal government as to the timely payment of principal and interest. However, if you sell a Treasury Note prior to maturity, it may be worth more or less than the original price paid. Fixed income investments are subject to various risks, including changes in interest rates, credit quality, inflation risk, market valuations, prepayments, corporate events, tax ramifications, and other factors. International investments carry additional risks, which include differences in financial reporting standards, currency exchange rates, political risks unique to a specific country, foreign taxes and regulations, and the potential for illiquid markets. These factors may result in greater share price volatility. Please consult your financial professional for additional information. This content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and they should not be considered a solicitation for the purchase or sale of any security.

Concord Asset Management, LLC (“CAM”) is a registered investment advisor with the Securities and Exchange Commission. CAM is affiliated, and shares advisory personnel with Concord Wealth Partners (“CWP”). CAM offers advisory services, including customized sub-advisory solutions, to other registered investment advisers and/or institutional managers, including its affiliate, Concord Wealth Partners, LLC. CAM’s investment advisory services are only offered to current or prospective clients where CAM and its investment adviser representatives are properly licensed or exempt from licensure.

The information provided in this commentary is for educational and informational purposes only and does not constitute investment advice and it should not be relied on as such. It should not be considered a solicitation to buy or an offer to sell a security. It does not take into account any investor’s particular investment objectives, strategies, tax status, or investment horizon. You should consult your attorney or tax advisor.

The views expressed in this commentary are subject to change based on the market and other conditions. These documents may contain certain statements that may be deemed forward‐looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected. Any projections, market outlooks, or estimates are based upon certain assumptions and should not be construed as indicative of actual events that will occur.

Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by CAM or its affiliates, or any non-investment related content, made reference to directly or indirectly in this newsletter will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this newsletter serves as the receipt of, or as a substitute for, personalized investment advice from CAM or CWP. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. CAM and CWP are neither law firms nor certified public accounting firms, and no portion of the newsletter content should be construed as legal or accounting advice. A copy of CAM’s current written disclosure Brochure discussing our advisory services and fees is available upon request or at https://concordassetmgmt.com/

Please Note: If you are a CAM or CWP client, please remember to contact us, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services, or if you would like to impose, add, or to modify any reasonable restrictions to our investment advisory services. CAM and CWP shall continue to rely on the accuracy of the information that you have provided. Please Note: If you are a CAM or CWP client, strong>please advise us if you have not been receiving account statements (at least quarterly) from the account custodian.

Christmas Comes Early

By Gary Aiken | December 6, 2023

As far as investors are concerned, Christmas came early! Looking back over the past 70 years, November has usually been an excellent month for stocks, returning 1.4% on average. This year the S&P 500 Total Return Index clocked in at an impressive 9.1% return for November. The bond market also turned in an outstanding result in November, with the Bloomberg Aggregate Bond Index delivering a 4.5% total return, outpacing over 98% of monthly returns dating back to the index’s inception in 1976.1
In my November commentary, I wrote about the dismal returns in stock and bond markets since July. I tried to contrast price action with the facts of decent real economic growth, slowing inflation, and rising corporate profitability. November gave us several data points to corroborate that view. First, third quarter GDP was revised higher from 4.9% to 5.2%. Next, the Federal Reserve’s preferred inflation measure, Core PCE, declined to a 3.5% year-over-year rate. Last, according to FactSet, as more companies reported earnings, it seems like we are indeed closing in on the first quarter in the past four where companies are reporting higher earnings than they were a year ago.2
High frequency and anecdotal data further our positive narrative. According to Adobe Digital Insights, November’s start of the holiday shopping period is the fastest-paced and highest-grossing ever. The Transportation Safety Administration reported that a record number of travelers passed through airports on Thanksgiving weekend. Finally, and this may be a little contrary, the labor market is getting softer.

Initial Jobless Claims

Source: Bloomberg Finance, L.P., U.S. Department of Labor

Why would the labor market softening be a “positive” indicator? Each revision to the weekly employment data has been revised to indicate more jobless claims and continuing claims during November. The Federal Reserve wants to see two things happening to confirm that its mission to combat inflation is working. First, it wants to see actual inflation rates decline towards its 2% target. Second, policymakers want to see the evidence of a slowing economy in softening labor market data—that means the unemployment rate inching its way upwards towards its 4.2% target for 2024. While employment data has surely been muddied by strikes in the auto and entertainment industries and the Thanksgiving holiday weekend, the data trend is moving the Fed’s way.

Continuing Unemployment Claims

Source: Bloomberg Finance, L.P., U.S. Department of Labor

The economy growing, inflation cooling, corporations making profits, and eroding labor market wage-price pressures are wonderful ornaments to hang on our tree. Markets increasingly took the November data as signs to erase the gloom and doom of the summer months and get into that holiday spirit. If inflation is heading down towards 2% over time and the economy will eventually cool to a 2% pace, then the central tendency for long-term rates is around 4%. A 10-year Treasury note yielding 4.99% (nearly the highest in the past twenty years) makes for an excellent stocking stuffer. Bond buyers scooped them up, and as prices went up, yields declined 66 basis points (0.66%) to 4.33%.
If the discount rate applied to future, growing earnings can be lower, then a higher Price-to-Earnings (P/E) multiple can be applied to all stocks—even those neglected during the first ten months of this year. Still, the Magnificent Seven (Microsoft, Meta Platforms, Amazon.com, Apple, Tesla, NVIDIA, and Alphabet) rose 11.7% during the month as an equal weight basket. The dominance of these stocks continued— especially as Artificial Intelligence-related revenues continued to live up to the hype for hardware and software applications.
When interest rates go down, interest-sensitive market sectors tend to react very positively. As a result, the MSCI USA Financials Index climbed 11.5%, and the MSCI USA Real Estate Index rose 12.2%. Concord has been underweighting these sectors during 2023, so this was a particularly challenging month for our portfolios. Still, these sectors along with utilities and industrials, have been amongst the worst performing sectors during 2023.

Lagging Sectors Outperformed in November

Source: Bloomberg Finance, L.P.

Let’s look beyond the Santa Claus rally to what the future may hold for stocks. November was a “Top 25” return month for the S&P 500 Index since 1950. Looking at the other 24 top months in the past 70 years may give us insight into future expectations. High-performing months can be inflection points – dividing what came before from what comes next. For instance, the S&P 500 returned 16.3% in October 1974 and preceded a 39.2% stock rise for the next 24 months as the U.S. exited the awful 1973-74 recession.
Similarly, the defeat of inflation (August 1982) and “Morning in America” (August 1984) revealed that 10.2% and 11% jumps in the index preceded 39% and 54% increases in the index in the ensuing two years. On the flip side, the 10.2% rise in the index in November 1980 gave false hope about the easiness of defeating inflation, and the market ambled to a 1.4% loss over the next two years. Of course, many of us today will remember the euphoria of the 9.7% blow-off top in March 2000 that eventually gave way to the dot-com bust and a 23.4% loss for stocks over the next 24 months.
The analysis of the top 25 months from 1950 to the present shows that two years later, 19 of the 23 complete two-year periods following a top month resulted in an average 31.1% gain for the stock market. On the flip side, four subsequent periods resulted in a negative outcome following a month with top performance, averaging a 10.4% loss. Even with those weightings in place, the weighted average expected return given that data set is to expect a healthy 23.9% return over the next 24 months. Of course, many of those top months were in the period after interest rates peaked in 1981. Declining interest rates had the effect of lifting asset prices regardless.
So, what if we tailor the analysis only to examine stocks when interest rates were rising from 1962-1982? The results are found in the table below. Still, despite the inflationary and secular headwinds (Vietnam War, Oil Embargo, and budget deficits from funding the Great Society), the expected average returns analysis indicates that buying stocks after a “Top Month” would have been a winner two years later.

Stock Market Returns 24 Months After “Top Month”

Source: Bloomberg Finance, L.P.

I am looking forward to the holidays. Time with family, friends, and, of course, piles of investment research to prepare for the upcoming 2024 Forecast Event. There will be plenty of time to make predictions about the future, but a historical analysis of past great months would favor the idea that the best is yet to come. The macroeconomic data seems agreeable: cooling inflation, reasonable economic growth, and an America with plentiful jobs. Some investors may worry that a month like the one we just had means it’s too late to buy stocks. If you have a long-term perspective and an equally long investment horizon, often the answer is that the best time to buy stocks is when you have cash.

Author

Gary Aiken, Chief Investment Officer

Gary Aiken is the Chief Investment Officer for Concord Asset Management and is responsible for macroeconomic analysis, asset allocation, and security selection, as well as trading and investment operations.

Gary has over 21 years of investment experience and holds an undergraduate degree in economics from the University of Maryland and an MBA from The George Washington University School of Business.

—

Sources:

1Bloomberg Finance, L.P., 2023
2FactSet, December 1, 2023

Disclosures: Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Concord Asset Management, or any non-investment related content, made reference to directly or indirectly in this article will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this article serves as the receipt of, or as a substitute for, personalized investment advice from Concord Asset Management. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. Concord Asset Management is neither a law firm, nor a certified public accounting firm, and no portion of this content should be construed as legal or accounting advice. A copy of Concord Asset Management’ current written disclosure Brochure discussing our advisory services and fees is available upon request or at https://concordassetmgmt.com/. Please Note: If you are a Concord Asset Management or Concord Wealth Partners client, please remember to contact the firm in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing, evaluating, and/or revising our previous recommendations and/or services, or if you would like to impose, add, or to modify any reasonable restrictions to our investment advisory services. Concord Asset Management and Concord Wealth Partners shall continue to rely on the accuracy of information that you have provided. Please Note: If you are a Concord Asset Management or Concord Wealth Partners client, please advise us if you have not been receiving account statements (at least quarterly) from the account custodian.