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Over the last 400 days, the S&P 500 has been up over 50%. In light of this, consolidation is not unexpected, especially considering investor uncertainty about the pace of disinflation and the timeline of Fed actions. The path to inflation normalization is unlikely to be smooth, so while equities may be in an uptrend, some fluctuations along the way are possible. You may be wondering what this means for you, especially since anxiety can accompany uncertain markets.
The first thing to note is that overall, the recent upward momentum of the market is a positive thing. Strong earnings, broad economic recovery after the pandemic, and corporate net profits have contributed to a solid foundation for the S&P 500’s rise.
The projected issues, however, are largely a result of the pace of disinflation. Again, there are positive things to note with the current disinflation trajectory; notably, goods prices have declined once again this month, with a total 13% decrease on a year-over-year basis. Other sectors, however, such as services, housing, and production costs, remain elevated. These elevations significantly impact the cost of living and overall financial wellbeing. While everyone hopes these prices decrease, we cannot accomplish this process overnight. In order to successfully prevent the economy from falling into a recession, the Fed must lower inflation rates gradually.
Of course, the timing of the Federal Reserve’s expected interest rate decrease plays a large role in the economy’s behavior. As of the June Federal Open Market Committee meeting, interest rates remained unchanged. Many investors now anticipate a single rate cut in 2024. Should persistent inflation impact rate cuts, it is possible that market enthusiasm could decrease, leading to a change in the S&P’s upward trend.
As seasoned investors know, the road to sustained growth is rarely a straight line. The upcoming months may prove to be a period of volatility, but I remain confident in the fact that the market will do as it always does: provide long-term positive returns for investors who are willing to trust the process. Projected market volatility is not necessarily a negative thing. Investors, especially with the help of financial advisers, can take advantage of the opportunity to enter the market at a low point or invest in more stable sectors during turbulent times. Regardless of your financial situation, our GDS Wealth Management team is here to help.
If you have any questions about upcoming market trends, your investment portfolio, or your financial plan, please contact our office at (469) 212-8072 or visit www.gdswealth.com. Any of our financial advisers would be delighted to discuss your concerns with you.
1 Raymond James, 2024.
2 CNBC, 2024.
3 Northwestern Mutual,2024.
4 Ibid.
5 Federal Reserve System, 2024.
Investing carries inherent risks, including market volatility, potential loss of capital, and uncertainty in returns, which investors should carefully consider before making any financial decisions. GDS Wealth Management is an investment adviser in Flower Mound, TX. GDS Wealth Management is registered with the Securities and Exchange Commission (SEC). Registration of an investment adviser does not imply any specific level of skill or training and does not constitute an endorsement of the firm by the Commission. GDS Wealth Management only transacts business in states in which it is properly registered or is excluded or exempted from registration. A copy of GDS Wealth Management's current written disclosure brochure filed with the SEC, which discusses, among other things, GDS Wealth Management’s business practices, services, and fees, is available through the SEC's website at: adviserinfo.sec.gov.
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