The Markets
What will the Federal Reserve do?
Uncertainty about the direction and timing of Fed rate cuts is causing stock markets in the United States to charge and retreat. U.S. stocks rallied for five consecutive months (anticipating rate cuts early in 2024) before retreating in April after higher-than-anticipated inflation suggested the Fed might delay any rate reductions.
Markets retreated early last week on concerns the Fed might take a more hawkish tone following the Federal Open Market Committee (FOMC) meeting – but it did not. Following the meeting, the FOMC release stated:
“Recent indicators suggest that economic activity has continued to expand at a solid pace. Job gains have remained strong, and the unemployment rate has remained low. Inflation has eased over the past year but remains elevated. In recent months, there has been a lack of further progress toward the Committee’s 2 percent inflation objective… The Committee does not expect it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward 2 percent.”
While the Fed left its rate policy unchanged, it eased a bit using a different policy lever. “…[FOMC] policymakers gave a green light to slowing the pace at which the Fed is shrinking its Treasury holdings, which may modestly work against the rise in market interest rates,” reported Jed Graham of Investor’s Business Daily.
Markets found the Fed’s moderate tone encouraging, and optimism expanded after the U.S. employment report suggested the labor market might be cooling off.
“The indexes bounced back from early-week lows after the employment report revealed that the U.S. added fewer jobs than expected in April—but enough to indicate a still-growing economy. For now, that could help keep a lid on inflation, prevent the Federal Reserve from needing to raise rates again, and maybe even allow it to cut them,” reported Jacob Sonenshine of Barron’s.
Major U.S. stock indices finished the week higher, according to Barron’s. The U.S. Treasury market rallied, too. Yields on longer maturities of U.S. Treasuries moved lower over the week.
| Data as of 5/3/24 | 1-Week | Y-T-D | 1-Year | 3-Year | 5-Year | 10-Year |
|---|---|---|---|---|---|---|
| Standard & Poor's 500 Index | 0.6% | 7.5% | 25.3% | 6.9% | 11.7% | 10.5% |
| Dow Jones Global ex-U.S. Index | 1.6 | 3.3 | 8.9 | -2.0 | 2.9 | 1.8 |
| 10-year Treasury Note (yield only) | 4.5 | N/A | 3.4 | 1.6 | 2.5 | 2.6 |
| Gold (per ounce) | -2.1 | 10.4 | 13.9 | 8.5 | 12.4 | 5.8 |
| Bloomberg Commodity Index | -1.5 | 2.7 | -0.2 | 3.7 | 4.9 | -3.0 |
S&P 500, Dow Jones Global ex-US, Gold, Bloomberg Commodity Index returns exclude reinvested dividends (gold does not pay a dividend) and the three-, five-, and 10-year returns are annualized; and the 10-year Treasury Note is simply the yield at the close of the day on each of the historical time periods.
Sources: Yahoo! Finance, MarketWatch, djindexes.com, London Bullion Market Association.
Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. N/A means not applicable.
Who’s Your Beneficiary?
Beneficiaries are the people who will inherit your assets –savings and investment accounts, life insurance policies, homes, cars, and other possessions. In general, there are two ways to name beneficiaries. You can:
- Designate a beneficiary on an account. For example, when you signed up for a retirement plan at work, you were probably asked to name a primary (and, sometimes, a secondary) beneficiary for the account. If you have life insurance or a health savings plan at work, you probably named beneficiaries for these accounts, too.
- Name an heir in your will. As part of the estate planning process, people write wills that indicate who should inherit various assets.
What many people don’t understand is that designated beneficiaries trump wills. Ashley Kilroy of SmartAsset reported:
“Wills are malleable documents, subject to interpretation from probate court and contestable by family members demonstrating an interest in your estate (even if you don’t list them in your will).
Conversely, your contract with a financial institution creates an unimpeachable beneficiary designation. The financial company and relevant laws ensure your beneficiary will receive payment, even if other family members try to claim the benefit.”
If you’re itching to go online and see who you named as the beneficiaries for various accounts, you should. It’s important to review your financial accounts – life insurance policies, retirement plan accounts, health savings accounts, and investment and bank accounts – and confirm that the correct beneficiary is named.
The good news is that checking designated beneficiaries is easier than it used to be. Just log in to your account. If your designation is outdated, you may be able to update the information by completing a beneficiary change form. If you have any questions, get in touch. We’re happy to help.
Weekly Focus – Think About It
“Responsibility to yourself means refusing to let others do your thinking, talking, and naming for you; it means learning to respect and use your own brains and instincts; hence, grappling with hard work.”
—Adrienne Rich, poet
Wishing you and your families well,
Sean M. Dowling, CFP, EA
President, The Dowling Group Wealth Management
Please feel free to forward this commentary to family, friends, or colleagues. If you would like us to add them to the list, please reply to this e-mail with their e-mail address and we will ask for their permission to be added.
- Government bonds and Treasury Bills are guaranteed by the U.S. government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value. However, the value of fund shares is not guaranteed and will fluctuate.
- Corporate bonds are considered higher risk than government bonds but normally offer a higher yield and are subject to market, interest rate and credit risk as well as additional risks based on the quality of issuer coupon rate, price, yield, maturity, and redemption features.
- The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. You cannot invest directly in this index.
- All indexes referenced are unmanaged. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment.
- The Dow Jones Global ex-U.S. Index covers approximately 95% of the market capitalization of the 45 developed and emerging countries included in the Index.
- The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.
- Gold represents the afternoon gold price as reported by the London Bullion Market Association. The gold price is set twice daily by the London Gold Fixing Company at 10:30 and 15:00 and is expressed in U.S. dollars per fine troy ounce.
- The Bloomberg Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998.
- The DJ Equity All REIT Total Return Index measures the total return performance of the equity subcategory of the Real Estate Investment Trust (REIT) industry as calculated by Dow Jones.
- International investing involves special risks such as currency fluctuation and political instability and may not be suitable for all investors. These risks are often heightened for investments in emerging markets.
- Yahoo! Finance is the source for any reference to the performance of an index between two specific periods.
- Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.
- Economic forecasts set forth may not develop as predicted and there can be no guarantee that strategies promoted will be successful.
- Past performance does not guarantee future results. Investing involves risk, including loss of principal.
- You cannot invest directly in an index.
- Stock investing involves risk including loss of principal.
- The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly. Economic forecasts set forth may not develop as predicted and are subject to change. Investing involves risk including loss of principal.
- The Price-to-Earning (P/E) ratio is a measure of the price paid for a share relative to the annual net income or profit earned by the firm per share. It is a financial ratio used for valuation: a higher P/E ratio means investors are paying more for each unit of net income, thus, the stock is more expensive compared to one with a lower P/E ratio.
- These views are those of Carson Group Coaching, and not the presenting Representative or the Representative’s Broker/Dealer, and should not be construed as investment advice.
- This newsletter was prepared by Carson Group Coaching. Carson Group Coaching is not affiliated with the named broker/dealer.
- The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee it is accurate or complete.
- Consult your financial professional before making any investment decision.
Sources:
https://www.reuters.com/markets/global-markets-wrapup-1-2024-04-30/
https://www.investors.com/news/economy/federal-reserve-meeting-may-jerome-powell-qt-rate-cuts/ (or go to https://resources.carsongroup.com/hubfs/WMC-Source/2024/05-06-24_Investors%20Business%20Daily_Fed%20Meeting%20Rate%20Cuts%20Will%20Wait_3.pdf)
https://www.federalreserve.gov/newsevents/pressreleases/monetary20240501a.htm
https://www.barrons.com/articles/fed-isnt-markets-friend-s-p-500-1eaceb1c?refsec=the-trader&mod=topics_the-trader (or go to https://resources.carsongroup.com/hubfs/WMC-Source/2024/05-06-24_Barrons_Make%20No%20Mistake%20the%20Fed%20Isnt%20the%20Markets%20Friend_6.pdf)
https://www.barrons.com/market-data?mod=BOL_TOPNAV (or go to https://resources.carsongroup.com/hubfs/WMC-Source/2024/05-06-24_Barrons_Data_7.pdf)
https://www.investopedia.com/terms/n/named-beneficiary.asp
https://www.investopedia.com/retirement/importance-updating-retirement-account-beneficiaries/
https://smartasset.com/estate-planning/beneficiary-vs-will
https://www.goodreads.com/author/quotes/29947.Adrienne_Rich
ADV & Investment Objectives: Please contact The Dowling Group if there are any changes in your financial situation or investment objectives, or if you wish to impose, add or modify any reasonable restrictions to the management of your account. Our current disclosure statement is set forth on Part II of Form ADV and is available for your review upon request.
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