Author: William Winkeler

  • Stock Market Recap: January 2024

    Month in Review

    • It was a choppy month for stock and bond markets as volatility rose towards the end of January. US large caps squeezed out a positive return, while US small caps and international equities trailed.
    • Investors pushed expectations of interest rate cuts out, helping to increase interest rates, which weighed on major bond markets during the month.
    • Economic data remains strong enough that the Federal Reserve largely took a March rate cut off the table in late January.

    Equity Markets Following Bear Market Recoveries

    The S&P 500 reached a new all-time high on January 25th, illustrating the progress the equity market has made following the most recent bear market. Along with making new all-time highs comes an influx of short-term noise, making it important to review the history of market returns following bear market recoveries. Looking at all 14 cases since 1957, the S&P 500 rose an average of 23% over the 18 month period following the 20% recovery from a bear market low. In present day, the S&P 500 had a bear market low on October 12, 2022, and recovered 20% roughly 9 months later in June 2023. Ignoring short-termism around all-time highs, history suggests the equity markets continue to rise after recovering from a bear market.   

    Source: Yahoo! Finance as of 1/30/2024; BMO Capital Markets via Brian Belski.

    What’s on Deck for February?

    • Earnings season will wrap up, after companies posted largely mixed results in January. 
    • Banks are back in focus following the surprise weakness in some regional bank earnings. Given the events of March/April 2023, investors have heightened sensitivity to any perceived weakness in the banking channel.
    • The Federal Reserve does not have a (FOMC) meeting in February, so investors will look for additional information from Fed officials following the January meeting. The Federal Reserve surprised investors by taking a March rate cut off the table, suggesting it would happen later in 2024 depending on economic data.
    William Winkeler
    About the Author

    Bill has more than 15 years of experience in the investment industry, most recently as Managing Director of Investments at a private wealth management firm. In his role at Confluence, Bill chairs the Investment Advisory Committee and develops and implements investment strategy for clients of the firm, as well as communicates investment content with clients.

    Pittsburgh

    724-719-6600
    bill.winkeler@confluencefp.com
    Email Bill
    Jan-2024-Market-Recap-3Download

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    William Winkeler

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  • Stock Market Recap: December 2023

    Month in Review

    • Stock and bond markets extended their rally in December, capping off a strong fourth quarter with broad-based gains. Value stocks and US small cap stocks led equity markets higher during the month.
    • Major US bond markets finished in positive territory, preventing what would have been a record-breaking third consecutive calendar year loss.
    • The continued decline in inflationary data and increased likelihood of a rate cut by the Federal Reserve were key catalysts for markets during the month.

    Narrow Market Leadership

    The S&P 500 and growth stocks benefitted from continued strong results from technology companies during 2023. The outsized results of these companies pushed their valuations even higher, with Apple finishing the year as roughly 7% of the S&P 500’s value. This is the largest single weighting in the last 30-years and follows three previous years where Apple represented at least 6% of the S&P 500’s market capitalization. While Apple and six other companies were responsible for the lion’s share of the US stock market’s results in 2023, there are opportunities for broader participation as we head into 2024.

    Source: FactSet and Goldman Sachs Asset Management. As of December 31, 2023.

    What’s on Deck for January?

    • Earnings season starts, analysts expect S&P 500 companies to report the second straight quarter of earnings growth.
    • The Federal Reserve meeting on January 31st, where it is expected to hold interest rates steady. Investors will be focused on commentary and projections regarding the timing of the first interest rate cut. Cooling inflation supports a less restrictive approach from the Federal Reserve.
    • The US government is set to enter a phased shut-down on January 19th barring a new spending bill. Bipartisan negotiations are reported as active at time of writing.   

    Download the December 2023 Market Recap below:

    Dec.-2023-Market-RecapDownload
    William Winkeler
    About the Author

    Bill has more than 15 years of experience in the investment industry, most recently as Managing Director of Investments at a private wealth management firm. In his role at Confluence, Bill chairs the Investment Advisory Committee and develops and implements investment strategy for clients of the firm, as well as communicates investment content with clients.

    Pittsburgh

    724-719-6600
    bill.winkeler@confluencefp.com
    Email Bill

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    William Winkeler

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  • Stock Market Recap: November 2023

    Month in Review

    • Stocks rose sharply in November, breaking a three-month losing streak. Gains were broad based across major markets.
    • Bond markets also broke a five-month losing streak, posting strong results as short- and long-term interest rates fell significantly during November.
    • Multiple data points illustrated that inflation is in continued decline, raising investor confidence that the Federal Reserve is done hiking and turning its focus to potential rate cuts in 2024. 

    A November to Remember!

    November was a month to remember for investors: The S&P 500 posted its strongest November since 1980 (rising roughly 9%) and the Barclays Aggregate Bond Index had its best month since May 1985 (rising roughly 4.5%).

    What were the catalysts for such a sharp reversal?

    Investor sentiment had become overly negative – a three-month losing streak for stocks and a 5-month losing streak for bonds. This set-up was followed by unexpected positive developments on the fight against inflation. Multiple readings during November showed inflation rising by less than expectations. Federal Reserve officials also affirmed progress towards normalizing inflation, the decline can be seen in the exhibit below. The positive developments on inflation drove interest rates lower, sending stock and bond prices higher, as investors now shift their attention away from rate hikes to rate cuts.  

    Source: BLS, FactSet, J.P. Morgan Asset Management. CPI used is CPI-U and values shown are % change vs. one year ago. Core CPI is defined as CPI excluding food and energy prices. The Personal Consumption Expenditure (PCE) deflator employs an evolving chain-weighted basket of consumer expenditures instead of the fixed-weight basket used in CPI calculations. Guide to the Markets – U.S. Data are as of November 30, 2023.

    What’s on Deck for December?

    • Earnings season is wrapped up and government shutdown issues have been pushed out until January 19th and February 2nd of 2024.
    • The Federal Reserve meeting on December 13th will be watched closely for comments on the timing and magnitude of the first rate cut and the on-going shrinking of the Fed’s balance sheet. At time of writing, futures markets are implying a 50% chance of a 25bps rate cut during the March 20th, 2024 meeting.
    • As we enter 2024, the US Presidential election will once again be a focus. Despite a significant amount of noise, it is important to remember that the S&P 500 has only had negative returns in election years two of the last 20 election years (2000, 2008).

    Download the November 2023 Market Recap below:

    Nov-2023-Market-RecapDownload
    William Winkeler
    About the Author

    Bill has more than 15 years of experience in the investment industry, most recently as Managing Director of Investments at a private wealth management firm. In his role at Confluence, Bill chairs the Investment Advisory Committee and develops and implements investment strategy for clients of the firm, as well as communicates investment content with clients.

    Pittsburgh

    724-719-6600
    bill.winkeler@confluencefp.com
    Email Bill

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    William Winkeler

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  • Stock Market Recap: September 2023

    Month in Review

    • Stocks had their worst month since December 2022 and bonds fell for the fourth straight month. 
    • Rising Treasury yields were the primary catalyst – the 10-year Treasury yield hit a 16-year high during September.
    • Restrengthening inflation data and the prospect of additional interest rate hikes by the Federal Reserve are the main catalysts for the pressures.

    Bond Yields Return to Average

    Despite nearly a decade of low interest rates, the 10-year Treasury yield typically averages 3% to 5% yield, going back to the late 1800’s. For the first time since 2007, the 10-year Treasury rose to 4.5%, comfortably returning to long-term averages. Recent inflation data was stronger than expected, contributing to the increase in yield, along with the prospect of additional rate hikes from the Federal Reserve. The increase in yields reduces the value of bond investments in the short-term, and higher yields present a more attractive alternative to stocks – two reasons stocks and bonds struggled in August and September.

    What’s on Deck for October?

    • Outside of fundamentals, there are headwinds from the on-going autoworkers’ strike, and a potential shutdown of the US government. Both events historically have not had lasting impacts on the economy and markets.
    • The surprisingly strong labor market was the primary reason the predicted 2023 recession did not happen – investors will be watching job creation and unemployment claims data closely for any softening.
    • An additional interest rate hike in November or December is very much up in the air. Inflation data had strengthened somewhat, along with energy prices increasing sharply since June. It is unclear if this is enough for the Federal Reserve to hike one more time.

    Download the September 2023 Market Recap below:

    Market-Recap-Sept-2023Download
    William Winkeler
    About the Author

    Bill has more than 15 years of experience in the investment industry, most recently as Managing Director of Investments at a private wealth management firm. In his role at Confluence, Bill chairs the Investment Advisory Committee and develops and implements investment strategy for clients of the firm, as well as communicates investment content with clients.

    Pittsburgh

    724-719-6600
    bill.winkeler@confluencefp.com
    Email Bill

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    William Winkeler

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  • Stock Market Recap: August 2024

    Month in Review

    • Broad-based gains during the month of August, with US large cap stocks finishing the month up +2.43% (S&P 500 TR Index). In the US, large cap value (+2.68%, Russell 1000 Value TR Index) finished ahead of large cap growth (2.08%, Russell 1000 Growth TR Index) for the second consecutive month.
    • US small cap stocks took a breather after a strong July, finishing August down -1.49% (Russell 2000 TR Index). Outside the US, developed international equities benefitted from a weakening US dollar, rising +3.25% in August (MSCI EAFE NR USD).
    • Bond markets rose for the fourth straight month in August, with the Barclays US Agg Bond TR Index finishing the month +1.44%.

    What Happens Next: Soft or Hard Landing?

    The Federal Reserve is poised to cut interest rates in September, the first interest rate cut since they began increasing interest rates in March 2022. Investors are now pondering, “what happens next?”: a “soft” or “hard” landing for the economy.

    While not officially defined, a soft landing would be a continued decline in inflation and interest rates, without growth slowing down enough to enter a recession. Hard landing would be the opposite – a continued increase in unemployment and a slowdown in economic growth, resulting in a recession. Soft landings are historically less common, with the most recent (and classic case) being the 1994-1995 period.

    Inflation has fallen closer to the Federal Reserve’s target rate, while unemployment has also begun to increase, prompting the likely rate cut in September. However, other signs indicate continued strength in the economy: for example, estimates for GDP growth this quarter stand at +1.5%. With no clear forecasts for a soft or hard landing, investors have priced in three to four rate cuts by the end of 2024, indicating expectations that the Federal Reserve will start and continue rate cuts in September.

    Sources: Capital Group, Bureau of Economic Analysis, FactSet. Figures for Q1:20, Q2:20, and Q3:20 are –5.5%, –31.6%, and 31.0% respectively, and are cut off by the y-axis given the extreme fluctuations associated with the COVID-19 pandemic. Estimate for Q3:24 is based on the mean consensus estimate from FactSet. As of August 22, 2024.

    What’s on Deck for September?

    • With  earnings season wrapped up in August, investors will be watching the Federal Reserve’s FOMC meeting closely for color around a potential rate cut. 
    William Winkeler
    About the Author

    Bill has more than 15 years of experience in the investment industry, most recently as Managing Director of Investments at a private wealth management firm. In his role at Confluence, Bill chairs the Investment Advisory Committee and develops and implements investment strategy for clients of the firm, as well as communicates investment content with clients.

    Pittsburgh

    724-719-6600
    bill.winkeler@confluencefp.com
    Email Bill
    August 2024 Market RecapDownload

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    William Winkeler

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  • 4 Investment Themes for 2023

    Heading into 2023, the Investment Advisory Committee believes we are beginning to return to a more historically normal, rational economic environment.

    The Committee has identified four key themes for 2023 and the years ahead:

    1. Fundamentals Matter Again:

    • From 2009 to 2021, expansive government and monetary policies kept interest rates and inflation near record lows.
    • This environment favored US and growth stocks, whose stock prices are driven primarily by future growth prospects, as opposed to things like profitability and earnings.
    • The unwinding of these accommodative policies is leading us back to an environment where strong company fundamentals will likely again be vital when building investment portfolios.

    2. Dividends Back in Focus:

    • Dividends represented a historically small amount (16%) of the S&P 500’s return during the 2010’s and early 2020’s.
    • Going back to 1926, dividends have contributed 38% of the market’s annualized return.
    • As we return to a more normalized environment, we believe dividends will likely become a larger portion of total return.

    3. “Income” is Back in Fixed Income:

    • The rise of inflation was a key catalyst for pushing interest rates back to historical levels.
    • While difficult in some ways, the new interest rate environment means investors can likely rely on bonds again for income.

    4. Asset Allocation Works Again:

    • In 2022, value stocks performed better than growth stocks and international stocks beat US stocks. This was in contrast to the past decade where returns have been concentrated primarily in US Growth stocks.
    • We believe the shifting environment could result in continued normalization, benefitting diversified portfolios.
    • For the first time in over a decade, bonds will likely play a meaningful role in portfolio composition.

    Source: Morningstar

    The future is impossible to predict, and nobody has a crystal ball. However, we believe that the four themes listed above will likely have a major impact on investor outcomes over the next year and beyond.

    If you would like to talk through how these themes may impact your portfolio, please give us a call.

    William Winkeler
    About the Author

    Bill has more than 15 years of experience in the investment industry, most recently as Managing Director of Investments at a private wealth management firm. In his role at Confluence, Bill chairs the Investment Advisory Committee and develops and implements investment strategy for clients of the firm, as well as communicates investment content with clients.

    Pittsburgh

    724-719-6600
    bill.winkeler@confluencefp.com
    Email Bill

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    William Winkeler

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  • Market Update from Confluence Financial Partners – Sept. 2022

    It is difficult to turn on the news and not be overwhelmed by negative headlines: bear markets, recession, political partisanship, to name a few.

    In times like these, we believe it is key to focus on actions that you can control. Hear from Greg Weimer, CEO, and Bill Winkeler, CFA, CFP®, Director of Investments, on what we at Confluence are thinking about and executing for our clients.

    Confluence Wealth Services, Inc. d/b/a Confluence Financial Partners is an SEC-registered investment adviser. Registration of an investment adviser does not imply any level of skill or training. Please refer to our Form ADV Part 2A and Form CRS for further information regarding our investment services and their corresponding risks.

    Additional information about Confluence Wealth Services, Inc. is available on the Investment Adviser Public Disclosure (IAPD) website at: www.adviserinfo.sec.gov.

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    William Winkeler

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  • Market Update from Confluence Financial Partners – June 2022

    So far, 2022 has been a challenging year for investors. The market has faced several headwinds including inflation, rising interest rates, supply chain disruptions, and labor market shortages, to name a few. Join us as we discuss these challenges and our perspective for the future.

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    William Winkeler

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  • Market Update from Confluence Financial Partners – May 2022

    Though the market changes, our commitment to clients does not. Our Chief Executive Officer, Greg Weimer and Director of Investments William R. Winkeler Jr., CFA, CFP® give you an update on the current market and share insights on how to navigate these times.

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    William Winkeler

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