Author: William Winkeler

  • Stock Market Recap: March 2024

    Month in Review

    • Stock and bond markets rallied during March, with broadening of results- large cap value stocks (+5.0%, Russell 1000 Value TR Index), small cap stocks (+3.6%, Russell 2000 TR Index), and international stocks (+3.3%, MSCI ACWI Ex-USA NR Index) finished the month ahead of large cap growth stocks (+1.8%, Russell 1000 Growth TR Index).
    • Economic data continues to look strong in the United States. The Federal Reserve also confirmed their forecast of three 0.25% interest rate cuts in 2024.

    Time to Look Beyond Cash?

    Last month we discussed the difficulty in forecasting changes in interest rates. During March, investors spent the month aligning their outlook with the Federal Reserve’s guidance, which remains some level of interest rate cuts sometime later this year. While the exact timing cannot be known, we do know that historically there have been opportunities to shift out of cash investments near peak interest rates.

    Going back to the six previous cycles since 1984, investors have been better off investing in bonds, US stocks or a balanced portfolio compared to staying in cash during the 12-months following the peak level of interest rates. Forecasting the exact time of peak interest rates/rate cuts is fruitless, but for long-term investors there is an opportunity to look beyond cash.

    Source: Bloomberg, FactSet, Federal Reserve, Robert Shiller, J.P. Morgan Asset Management. The 60/40 portfolio is 60% invested in S&P 500 Total Return Index and 40% invested in Bloomberg U.S. Aggregate Total Return Index. The S&P 500 total return figure from the 1984 period was calculated using data from Robert Shiller. The analysis references the month in which the month-end 6-month CD rate peaked during previous rate hiking cycles. CD rate data prior to 2013 are sourced from the Federal Reserve, whereas data from 2013 to 2023 are sourced from Bloomberg. CD subsequent 12-month return calculation assumes reinvestment at the prevailing 6-month rate when the initial CD matures.

    What’s on Deck for April?

    • The Federal Reserve meets at the end of April, they are expected to hold interest rates constant. Investors will look for updates around the timing of interest rate cuts and balance sheet changes during the presentation. 
    • The inflation report and jobs report for March will be watched by investors for signs of continued progress on the inflation front, and for any weakening in the jobs market.
    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
    March-2024-Market-RecapDownload

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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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