Wes Johnson with ACT Advisors, brings you your March 2024 financial update. Wes Johnson is co-owner of ACT Advisors, based in Mt. Pleasant, South Carolina. Let’s dive into the details of the market’s performance so far this year and the recent changes we’ve made to your portfolios.
As we enter the third month of the year, 2024 is shaping up to be quite similar to 2023 in many respects. On the surface, the markets seem to be performing well, particularly if you focus on the S&P 500, which is up nearly 7% in just two months. This index, which comprises large-cap U.S. stocks, is heavily weighted toward big growth tech companies, and their strong performance is driving the overall market gains.
However, when you look beyond the S&P 500, the picture becomes more nuanced. The Dow Jones Industrial Average, which also includes large-cap stocks but without as much emphasis on tech companies, is up only about 3.5%—still a solid performance but not as impressive as the S&P 500. Meanwhile, mid-cap and small-cap stocks have barely moved, and the bond market has declined by 1.5%.
In essence, while the headline numbers for large-cap stocks look great, the broader market is not as strong as it appears. As Wes Johnson explains, “Just like last year, large-cap stocks make the market look good on the surface, but underneath, things aren’t as rosy.”
At ACT Advisors, we take a proactive approach to managing your investments, and March has brought some significant changes to both our stock and bond rotation strategies.
- Stock Rotation Strategy: For January and February, we held a position in the NASDAQ ETF (known as the Q’s), which focuses on large-cap, tech-heavy stocks. This position performed exceptionally well, delivering over 7% returns in just two months. However, as we entered March, the leadership in the market shifted from large-cap tech stocks to mid-cap stocks. As a result, we replaced the Q’s with a mid-cap ETF starting March 1.
- Bond Rotation Strategy: Our bond rotation typically includes three positions. For March, we are maintaining our holdings in high-yield bonds and preferred securities, but we are selling out of long-term treasuries. These will be replaced with convertible securities, which offer a blend of equity and bond characteristics, helping to reduce interest rate sensitivity while providing growth potential.
Additionally, we’ve made another notable change by replacing a long-held position in the Invesco Dynamic Multifactor ETF (OMFL) with the WisdomTree Rising Dividends ETF. This new position focuses on large-cap, dividend-paying stocks, which are typically more conservative and less risky—a smart move in a market that might soon face some volatility.
As we progress through 2024, it’s important to recognize that the market has had a remarkably strong run with little to no volatility, especially in large-cap growth stocks. Given that this is an election year, and considering the market’s current high valuations, a pullback or “bump in the road” could happen at any time.
Wes Johnson advises, “A pullback would not be surprising and should be viewed as a buying opportunity rather than a cause for concern. We’re long overdue for some type of consolidation, where the high-flyers might come back to earth and allow mid-caps and small-caps to catch up.”
This potential consolidation phase is a normal part of market behavior and should be expected rather than feared. When it occurs, it can present an opportunity to buy into strong assets at a lower price.
At ACT Advisors, we always aim to stay ahead of market trends and make adjustments to your portfolios that align with your financial goals. We appreciate your trust in us and encourage you to reach out if you have any questions or concerns.
Wes Johnson is a seasoned financial advisor and co-founder of ACT Advisors, alongside Doug English. Based in Mt. Pleasant, South Carolina, Wes brings a wealth of experience in managing investment portfolios and guiding clients through the complexities of financial planning. ACT Advisors specializes in providing personalized financial planning services tailored to the unique needs of each client. Known for their innovative strategies and client-first approach, ACT Advisors is dedicated to helping you achieve your long-term financial goals.
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