As we approach the end of the first quarter of 2024, the market has managed to continue to climb, even with headwinds such as geopolitical conflicts and elevated interest rates still prevalent features in the daily newsfeed. Although investors remain concerned about prices at the grocery store, one worry overrides all others: the election. According to a recent investor survey by Janus Henderson, over 78% of investors cite the election as their biggest worry in 2024.

When it comes to New Year’s Resolutions, there seems to be two types of people: those who look forward to making (and sometimes breaking) them, and those who think the whole thing is probably a waste of time. Everyone knows that many popular resolutions are broken by the time Valentine’s Day comes around, just look at the gym in January versus February or March!

2023 began with a hangover of sorts with the same troubles that plagued the market last year. But how has the situation changed year to date? In this inaugural episode in our series quarterly market updates, Brian J. Murphy, CIMA® Senior Vice President, Chief Investment Strategist joins Laurie Haelen, AIF®, Senior Vice President, Director of Wealth Solutions to discuss various aspects of financial markets over the past quarter as well as the current market climate. We’ll address inflation’s impact on the economy, the current labor market, valuations, possible opportunities with fixed income, and the importance of focusing on long term goals during times of market uncertainty.

Many Americans are utilizing investment accounts to build wealth. In fact, sums held in investments often exceed what would typically be held in a checking or savings account. Additionally, the average consumer likely does not check in on their investment account activity as often as they review their checking account balance. What does this all add up to? Vast opportunities for fraudsters to target unsuspecting consumers. Read on to learn how can protect your accounts.

Matching assets with liabilities is one of the prudent rules of banking. The failure to do that led to such financial crises as the Savings & Loan collapse of the 1980s and it surfaced again when a little-known, yet financially prominent California bank collapsed last month, sharply shifting economic fortunes and central bank policy.

Your investment portfolio can help to secure your future, but did you know it can also provide you convenient access to funds when you need it?

There's no doubt about it — 2022 has been a tumultuous year for the financial markets. If you are looking forward to a fresh start this year, why not begin with your personal finances? Here are some tips to help you get started.

There's no doubt about it — 2022 has been a tumultuous year for the financial markets. If you are looking forward to a fresh start this year, why not begin with your personal finances? Here are some tips to help you get started.

This year has been an admittedly painful one for both U.S. and international stocks. Through 9/30/22, and per MSCI Investable Market Index (IMI) data obtained through Bloomberg by Northern Trust Asset Management, U.S. equities are down 24.7%, emerging international equities are down 26.5% and developed international equities (ex-U.S.) are down 26.6%.

The reigniting of inflation to its highest levels in over four decades has been the catalyst for the dramatic sell-off in stock and bond markets for the past year. Inflationary pressures began building in early 2021 as the result of several factors: revived consumer demand in the aftermath of the COVID shutdowns; supply chain disruptions from multiple sources; and the excessive monetary and fiscal stimulus from multiple COVID rescue plans implemented by the Federal Reserve and the Federal government.

U.S. financial markets continued to be under pressure this month, with the S&P 500 Index (a proxy for large U.S. stocks) down over 18% from its 1/2/22 all-time high, the S&P Mid Cap 400 Index (a proxy for mid-sized U.S. stocks) down over 17% from its 11/8/21 all-time high, and the Russell 2000 Index (a proxy for small U.S. stocks) down over 25% from its 11/8/21 all-time high, as of the date of this writing. The pressure may very well continue, as the Fed raises interest rates and withdraws other forms of stimulus to bring inflation under control, but one thing’s for sure – if the Golden Rule is to sell high and buy low, things are becoming much more interesting on the buy side of the equation, particularly for small-cap stocks.

Equity markets fell last week following a hotter than expected inflation report. The S&P 500 was down over 4% on Tuesday alone, and off 4.7% for the week. Additionally, bond prices fell as yields rose with the 1-year Treasury topping 4% at one point late in the week.

Through 7/31/22, Northern Trust reports negative year-to-date investment returns in nearly all areas of the bond market, with emerging market debt faring the worst (down 14.3%), followed by high yield debt (down 9.1%), investment-grade bonds (down 8.2%), municipal bonds (down 6.6%) and Treasury inflation-protected securities (TIPs – down 5%). The greatest contributing factor to these declines has been the Federal Reserve Bank’s campaign to raise interest rates – specifically, the Federal Funds rate, which is a short-term lending rate that many other lending rates are influenced by. Unfortunately for bond investors, when current interest rates go up, existing (high quality) bond prices come down, as investors demand a higher rate of return on their new investment dollars.

With Gross Domestic Product (GDP) contracting for a second consecutive quarter in Q222, the U.S. economy has technically entered a recession, although many political figures would have us believe otherwise. If we’re not in “recession” already, we (likely) soon will be – financial markets have essentially told us so. Financial markets are almost always ahead of reality, in terms of discounting future earnings, directional moves in interest rates and even seasonal fluctuations in supply and demand. The last 6-12 months have been no exception, with nearly all parts of the market having sold off considerably. Domestic and international stocks are down 19-33%, bonds are down almost 17% and, more recently, even commodities are off approximately 20% from their highs. With respect to the equity market at least, drawdowns of 20% or more like this usually presage recession.

The first half of 2022 proved to be a reminder to investors of the unpredictable nature of investing. While markets weathered the COVID pandemic and its economic and humanitarian damage with surprising resiliency, they seem less able to adapt to the current issues around inflation. Investors certainly knew coming into the year that interest rates would be on the rise in an effort to quell higher prices, but no one anticipated how aggressive the Fed would become after sitting on its hands through 2021. In the Fed’s defense, China’s zero-tolerance policy on COVID has caused continued supply chain issues, and Russia’s invasion of Ukraine sent energy and other commodity prices skyrocketing, both giving inflation an unexpected tailwind. Either way, markets, both equity and fixed income, have not reacted kindly to the new stance and the Fed’s three increases totaling 1.5%. This puts rates well ahead of what was the original year-end estimate, with more rate hikes to come. So where do we go from here?