Doug English with ACT Advisors, brings you your May 2024 financial update. As we reflect on April, it’s important to understand the market movements and their implications for your investments.
April was a challenging month across the board. The bond market decreased by about 2.5%, driven by increasing fears that the Federal Reserve would not cut rates as early as anticipated. This apprehension also affected the stock market, which saw a decrease of approximately 4% for the month. The decline was widespread, impacting small caps, large caps, the Dow, and the S&P 500. Notably, small caps experienced a significant drop of about 7% in April alone.
Reflecting on the past, Doug English notes, “You’ll remember in my video from last month that we did expect a pullback. This is perfectly normal stock market behavior.” He draws parallels to the previous year, where the market awaited the Fed’s signal to stop increasing rates and eventually decrease them.
Throughout 2023, negative returns in the bond market were prevalent until a significant surge occurred in November and December. A similar pattern might unfold this year as the Fed’s rate-cutting timeline remains uncertain, causing market concern.
In April, more conservative investors saw smaller declines, with account decreases between 2% and 3%. Balanced and more aggressive accounts experienced larger declines, around 4%.
ACT Advisors remains proactive in adjusting portfolios to navigate these challenging times. During April, significant portfolio activity included a shift from the PIMCO StocksPLUS Fund to an energy ETF. This strategy aims to incorporate investments less directly affected by interest rates, providing some insulation against market volatility. Doug English explains, “The energy ETF was added about mid-month and has provided some nice dampening of volatility so far.”
The investment committee at ACT Advisors meets weekly to reassess and adapt strategies. For May, stock and bond rotations include:
- Stock Rotation: Selling the SPY position and moving into mid caps.
- Bond Rotation: Two-thirds of the rotation is moving into the cash-like instrument JPST, effectively exiting the bond market in those positions. The remaining third stays in the senior loan floating rate fund, reducing interest rate sensitivity.
Despite the current market volatility, Doug English remains optimistic about the future. “We believe the Fed will eventually cut rates, though it may take longer than initially expected. The impact of last year’s rate increases takes time to filter through the economy.”
He advises clients to stay informed and remain patient. “It might rhyme like last year, where we see the reward for the financial markets late in the year.”
As always, ACT Advisors is committed to serving you. We encourage you to reach out with any questions or concerns, especially regarding cash flows and timing. Our team is here to help you navigate these uncertain times and ensure your financial goals are met.
Doug English is a dedicated and experienced Certified Financial Planner® Practitioner at ACT Advisors, headquartered in Asheville, NC. With a deep understanding of market trends and a commitment to client success, Doug leverages his expertise to guide investors through complex financial landscapes. ACT Advisors is known for its client-focused approach and innovative strategies, helping to ensure that clients are well-positioned to achieve their financial goals. To learn more about Doug, visit https://act-advisors.com/about-us/our-team/doug-english/.
