Q2 2024 – Market Update
By Contessa Archuleta on August 12, 2024
The Markets – Kyle Burns[1]:
In the first six months of the year, the S&P 500 was up 15.3 percent led by tech stocks which were up by 28.2 percent. The start of the year for tech stocks has been one of the best starts seen in the last 35 years and after a year in 2023 where the tech-heavy Nasdaq 100 was up by 43 percent. The high tech returns seen through the first half of the year did not carry into the broader markets, and stock diversification limited equity returns for investors. This was seen in the Dow Jones Industrial Average, which underperformed, returning only 3.8 percent. Prices of smaller company stocks were impacted by the Federal Reserve’s higher for longer approach to interest rates with the Russell 2000 index returning only 1.6 percent. The outperformance of large cap stocks against small cap stocks has been the largest experienced since 1999.
The international developed markets, led by Europe, saw returns of 5.8 percent through the mid-year mark. The European Central Bank (ECB) had taken a similar, higher for longer approach to interest rates until June, when they lowered their key rates by .25 percent after nine months of holding rates stable. Europe was in a mild recession at the end of 2023, but saw the economy begin to grow again in the first quarter of 2024. Much of the economic turnaround in Europe has been led by tourism hotspots like Greece and Spain, while manufacturing hubs like Germany are failing to grow. The decrease in rates by the ECB may benefit manufacturing companies going forward. The decrease should also serve to maintain the strength of the U.S. dollar against the Euro which will support the ongoing boom in tourism and consumption in Europe.
In a year when the Federal Reserve was expected to lower their target interest rate as many as six times, there have been no cuts thus far. The hold has meant that short-term investors have been rewarded with high returns on savings, money market funds, CDs, and treasuries.
Many short-term investments have offered returns over five percent and have been a safe haven for those holding cash on the sidelines. While the short-term returns made sense for many conservative investors and those with cash needs in the near term, caution should be used to avoid falling into a cash trap. The cash trap is when medium- and long-term assets are held in short-term funds because the returns in the short-term feel safer. Investors are often better off holding those assets in investments that correspond to their unique investment time horizon. Investors could have earned over five percent in a money market over the past year, but if the assets were invested in a long-term investment like the S&P 500, returns would have been over 15 percent. The reduced risk of money markets offers a sense of security, and that benefit may outweigh the loss in returns for many investors. Investors in short-term assets also run the risk of being late to adjust when interest rates change. Cash alternative investment returns are likely to decline rapidly if the Federal Reserve were to lower rates, and investors may miss out on securing returns that last for an extended period.
There is much to watch for in the market as we approach the end of the year. There is uncertainty in interest rates, the U.S. presidential election, recession pressures in Europe, and conflict in various regions around the world. The unknowns make us nervous as investors and play into our near-term emotions.
In May, I crossed the ten-year mark since joining The Rikoon Group team. Crossing this milestone made me think about all the uncertainties we have faced as investors over that time period, and I looked back at the markets in 2014 for some perspective. In 2014, much like today, one of the hottest topics in the markets was interest rate policy as the Federal Reserve moved to taper their bond buying program. The tapering worried investors and the expectation was for interest rates to rise throughout the year. The 10-year US Treasury peaked on January 2nd of that year at 3.05 percent before reaching a low of 1.86 percent in October. The S&P 500 returned 30 percent in 2013, and many investors believed 2014 was set to have lackluster returns. While not equal to the 30 percent seen the year prior, the S&P 500 returned 11.4 in 2014. This was also a year that saw the invasion of Crimea by Russia and conflict in Gaza, both of which were unanticipated at the start of that year.
As we move forward, it is a good reminder that markets are unpredictable when viewed through a short-term lens. Understanding our own investment time frames in relation to managing investment risk is one of the best tools we have both to protect our assets and generate returns. The markets will offer some opportunities to adjust strategies according to certain trends or themes, but it is likely the greatest advantage will come from consistency over time.
Saving for College – Contessa Archuleta:
As I witness recent high school graduates getting ready to start their first year of college, it takes me back to over 25 years ago. When I was a junior in high school, I remember my friends being really excited when talking about where they were going to apply to college. At the age of 18, facing the whole world in front of me, I failed to consider the costs associated with attending a private, out-of-state institution. In my mind, I figured I would just apply for student loans and one day land a job that would allow me to pay back the debt I would incur. I was convinced this was the first of many long-term investments I needed to make for myself.
At the beginning of President Biden’s term, he attempted to pass federal student loan forgiveness legislation that would have had a profound impact on millions of lives. While his efforts failed, his administration is attempting to revive the effort before his time in office concludes. The current proposal would forgive student debt for millions of Americans. The average student loan debt for bachelor’s degree recipients was $29,400 for the 2021-22 school year, according to the College Board. Among all borrowers, the average balance is $38,290, according to mid-2023 data from Experian[2]. The purpose of this message is not to criticize or support the proposal, but to bring to your attention the importance of investing for your loved ones’ continued education.
According to U.S. News and World Report, the average cost of college tuition and fees for a four-year degree has risen 179.2% over the last 20 years with an average annual increase of 9.0%.[3] The average in-state cost of tuition and fees to attend a ranked public college for the 2023-2024 year was $10,662 compared to $42,162 for a private college. The average cost for out-of-state students at public colleges is $23,630.[4]
What does this mean and why does it matter? SAVE, SAVE, SAVE, and INVEST! The two most common investment vehicles are an UGMA (Uniform Gift to Minors Act) account and 529 educational plan. I will highlight the differences below:
Remember that saving for college is a marathon, not a sprint. The examples above are two options to save and invest for continued education. I encourage you to contact The Rikoon Group to review your overall financial strategy and determine how we can help you reach your savings goals for your children’s or grandchildren’s future.
Summer Intern: In June, The Rikoon Group welcomed our first summer intern, Kiefer Fitzgerald. Kiefer is a recent graduate of Santa Fe High School and is headed to New Mexico State University in Las Cruces in the fall. Kiefer’s interest in finance made him a great fit for our practice. In addition to taking on administrative office duties such as answering phones, filing, and prepping documents, Kiefer showed an interest in investing and our clients. Kiefer’s’ strong work ethic and willingness to learn will take him far and he begins his college adventure. We wish him the very best.
Staff Updates:
Kyle: As noted above, in May, I passed the ten-year mark at the Rikoon Group. It has been a great journey here that has been life changing. While I spend much less time analyzing bonds these days, I continue to find excitement in the office, getting to interact with all our clients and the team. My kids recently returned from a 17 day sleep away camp in Wyoming. During camp they canoed, visited Yellowstone and the Grand Tetons, rode horses, and even got to participate in some riflery. In August, they will start their freshman year at Santa Fe High School. James has been participating in the summer practices with the football team and will be on the freshman squad when school starts. Johnnie continued to play baseball with the high school team through the summer and is excited to start the year already knowing a good group of friends. It will be interesting watching the boys move into this next phase of their life.
Rob: The past several months have been productive here in Santa Fe and in Asheville. The various building projects are well underway and we hope to have most assets fully leased out by the end of the year. On the family side, Robyn’s new baby, Maeve, is thriving and will be six months old in early August. Hannah’s medical practice has started up in Santa Fe and she is looking for expanded and extended hours to better serve her patients. Much of July was taken up with the installation of several spherical sculptures, part of a larger series, in the new park being established off of Saddleback Road in Oshara Village close to the Santa Fe Community College. Reach out to me if you are interested in seeing photos.
Jeff: Our granddaughter, Ariah, turned 3 years old the first week of April and so she was then eligible to start attending the Preschool at the New Mexico School for the Blind in Albuquerque. She liked the preschool so much that she threw big fits at the end of school the first two days because she didn’t want the school day to end and go home. We had lots and lots of talks with her after that and told her that big girls don’t throw fits and make fusses at the end of school because the teachers, students and everybody go home, and then they come back again the next day. For the next week after that, when she walked out at the end of the school day, she would immediately tell us, “big girls don’t throw fusses at the end of school” and that she was ready to go home. Our daughter, Stephanie, completed the Emergency Medical Technician (EMT) Program at Santa Fe Community College and she is now working for an ambulance company. She often works some really long shifts and she is gaining lots of valuable experiences.
Contessa: My family and I kicked off our summer by taking an Alaskan cruise, which I consider an experience of a lifetime. We’ve also been able to spend a little bit of time outdoors with a camping trip to Lake City, Colorado, and a drive around the Alpine Loop. This proved to be a super popular trial for Jeeps, ATV/UTVs, and dirt bikes. We even saw a few brave souls riding their mountain bikes over the 63-mile route with more than 5,000 ft in elevation gains. We explored multiple abandoned mining towns, including Animas Forks -an old ghost town near Silverton, CO, that was once a bustling gold and silver mining community with 30 cabins, a hotel, general store, a saloon and post office. It was amazing to see that so many of the structures originally built in the 1870s were still standing. The summer is flying by with only a week left until the beginning of the new school year. This will be the last year of elementary for Samuel and the last year of junior high for Ayden. At the office, we continue to host events online and in-person and I look forward to helping our clients and supporting our community to finish out 2024 on the same strong note it started on.
Keren: I have welcomed summer this year perhaps more so than in previous years. The monsoons, evening walks with my dog, and time spent with friends on patios over a great meal have been particularly sweet. In July, my dad celebrated his 90th birthday. My mom and I worked for months to plan a surprise for him, and my son and I traveled to California to gather with family and friends to honour my dad’s grand achievement. We surprised him at breakfast the morning of his birthday, and again with a party the following Saturday. He was overwhelmed with gratitude both for those who gathered and to have lived to an age he could never have imagined he would see. I realized more and more what a gift it is to age, and pray I continue to take care of myself, both physically and financially, over the coming years as well as my dad has done.
Gayle: “There’s no place like home, there’s no place like home”. Dorothy from the Wizard of OZ was on to something. I recently drove from CO to SD, to ND, to MN, back through ND, to MT, to WY and home to CO. It was a self-prescribed trip to see family, friends, and scenery in the Midwest. My favorite residence of my life? My last home in Santa Fe. My favorite place to be now? Colorado, close to my daughter and her family.. But my heart, my heart will always belong to the wheat fields, the prairies, the Black Angus grazing, the sunsets, and the warm smiles and generous hugs of family, in North Dakota. Not to mention the one hour traffic jam in Teddy Roosevelt National Park, caused first by herds of bison, and then wild horses. And I witnessed a few brave photographers perhaps getting a bit too close to these “furry cows”!
Speaking of family, I am one very fortunate grandmother to have more time with Claire and Violet this summer. Some days they go to Base Camp, but other than the field trips, they find camp far too boring when they can be out and about with their Adventure Gramma. I learn a lot from them: Black Holes, the Bermuda triangle, and why Teslas catch on fire, to name a few. Violet, now 6 going on 7 and a soccer champ, asked me about the Presidential race in November. I can’t even! And Claire 10 going on 15 plus, continues to stun me with her soccer skills, when she’s not busy with clothes, earrings, and the like. It’s all too much fun. Hoping this summer provides you with the opportunity to enjoy the outdoors, family and friends, and learning new things. Maybe even about Black Holes! May you be as blessed as I am.
Anthony: It’s hard to believe the year is halfway over. Here at The Rikoon Group, we have been busy participating and hosting various events in town, which is always a fun way to connect with community and our clients. Our daughter Amaya finished off her 3rd grade school year with a ballet recital at the Lensic, and also making her First Holy Communion. She has since been participating in the summer program through Girls Inc. of Santa Fe, where she is learning to be “Strong, Smart, and Bold”. In June, Amaya turned 9 years old and is beginning to act like a pre-teen changing her interests from Barbies to clothes, shoes and make-up. In July, we took a road trip out to Aspen, CO for some fun and relaxation. Exploring the town we got to take in the amazing scenery, enjoy some delicious food, and even disconnect from tech devices in the higher elevations. As we begin August, there is no slowing us down. We are getting ready to jump back into the school routine and all the fun adventures 4th grade will bring.
Bonita: Time flies when you’re having fun! To kick off the summer, my boyfriend and I took a scenic drive through to southern New Mexico, stopping along the way to buy local goodies and see fields of green chile and other crops. I enjoyed reading up on historical facts and spooky stories that bring these small towns to life. We managed to find a prime camping spot at Elephant Butte where soft waves from the lake and a clear starlit night sky stole the night away. We enjoyed local food and the hot springs before making our way to White Sands National Park for a sunset hike in the dunes. It was fascinating to learn about White Sands and experience its mystery. We also visited with family in Chihuahua, Mexico and travelled somewhere new to the Sierra Nevada and Lake Tahoe area. We soaked in the historic David Walley’s Hot Springs and visited the surrounding towns where Pony Express riders passed through and where Samuel Clemens took on his penname Mark Twain. I am thankful for the moisture we have seen over the last couple of months to break the high desert heat. I also have kept busy helping my brother and his fiancé finalize wedding plans, chasing after my 2-year-old-monster-truck-loving Godson, and I mastering a recipe for Tiramisu. Back at the office, we hosted a couple of very successful events, one being our Annual Women’s Event, where we strive connect, educate, and inspire our community. I look forward to a great fall season in Santa Fe, planning exiting events for the reminder of the year, and working closely with all of you.
Chris: I am busy jumping into the deep end at The Rikoon Group as I learn about the practice and all of you. The team has been great, and I could not be happier to be here. I have been spending my days enjoying the Rail Runner as I commute from Albuquerque to Santa Fe; it is a great way to see our beautiful state. Unfortunately, I have been heads down studying for my (fingers-crossed) final exam of the Chartered Financial Analyst (CFA) program in August, but I hope to report back with a pass and some fun experiences!
Disclosures:
The Rikoon Group is comprised of investment professionals registered with Hightower Advisors, LLC, an SEC registered investment adviser. Some investment professionals may also be registered with Hightower Securities, LLC, member FINRA and SIPC. Advisory services are offered through Hightower Advisors, LLC. Securities are offered through Hightower Securities, LLC. This is not an offer to buy or sell securities. No investment process is free of risk, and there is no guarantee that the investment process or the investment opportunities referenced herein will be profitable. Past performance is neither indicative nor a guarantee of future results. The investment opportunities referenced herein may not be suitable for all investors. All data or other information referenced herein is from sources believed to be reliable. Any opinions, news, research, analyses, prices, or other data or information contained in this presentation is provided as general market commentary and does not constitute investment advice. The Rikoon Group and Hightower Advisors, LLC or any of its affiliates make no representations or warranties express or implied as to the accuracy or completeness of the information or for statements or errors or omissions, or results obtained from the use of this information. The Rikoon Group and Hightower Advisors, LLC assume no liability for any action made or taken in reliance on or relating in any way to this information. The information is provided as of the date referenced in the document. Such data and other information are subject to change without notice. This document was created for informational purposes only; the opinions expressed herein are solely those of the author(s) and do not represent those of Hightower Advisors, LLC, or any of its affiliates.
Hightower Advisors, LLC is an SEC registered investment adviser. Securities are offered through Hightower Securities, LLC member FINRA and SIPC. Hightower Advisors, LLC or any of its affiliates do not provide tax or legal advice. This material is not intended or written to provide and should not be relied upon or used as a substitute for tax or legal advice. Information contained herein does not consider an individual’s or entity’s specific circumstances or applicable governing law, which may vary from jurisdiction to jurisdiction and be subject to change. Clients are urged to consult their tax or legal advisor for related questions.
[1] FactSet as of 07/26/2024
[2] https://www.cnn.com/cnn-underscored/money/average-student-loan-debt
[3] https://educationdata.org/average-cost-of-college-by-year
[4] https://www.usnews.com/education/best-colleges/paying-for-college/articles/paying-for-college-infographic#:~:text=The%20average%20in%2Dstate%20cost,respectively%2C%20U.S.%20News%20data%20shows
