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Stock Market Recap: April 2024


  • April saw major bond and stock markets decline due to a shifting interest rate outlook, following higher-than-expected inflation data. The S&P 500 had its first 5% or greater drop since October 2023 in April.
  • In the equity market – areas with greater sensitivity to high interest rates lagged, such as small cap stocks (-7.04%, Russell 2000 TR Index). Large cap stocks also declined, with value stocks down -4.27% (Russell 1000 Value TR Index) and growth stocks down -4.24% (Russell 1000 Growth TR Index). Emerging market equities bucked the trend and finished in positive territory (+0.45% MSCI Emerging Market NR Index).
  • As of April 30th, investors were no longer pricing a cut to the Fed Fund rate for 2024, leading major bond markets to 2024 lows (-2.53% in April, Bloomberg Barclays Aggregate Bond TR Index).

Large growth companies continue to drive a large portion of the US equity market’s results during the past three and five years – April was no different. The S&P 500 (weighted by the size of the companies in the index) has outperformed the equal-weighted S&P 500 (representing the results of the average company) by an increasingly wide margin over the past 18 to 24 months.

This has been driven by fast-growing technology companies: technology stocks represent roughly 30% of the market-cap weighted S&P 500, compared to 14% weight in the equal-weighted S&P 500. However, it is important to adopt a longer perspective during these unusual periods. Over the past 15- and 20-year periods, as well as since 2003 – the equal weighted S&P 500 index is ahead or in-line with the market cap weighted S&P 500. On a calendar year basis, the equal-weighted S&P 500 has finished ahead 12 out of 21 years through 2023.

Although the market has been very top heavy, with the fast-growing technology companies driving the market, markets are cyclical, and longer-time horizons highlight the balance over time.

Source: Raymond James, FactSet. Data as of 2/29/2024. Since inception date of the equal-weighted is 1/3/2003.
  • Inflation data will be top-of-mind given the recent hot streak in data. Federal Reserve commentary around the data will also be closely watched by investors.
  • First quarter 2024 earnings will wrap up in May. Through the end of April, earnings have finished ahead of expectations for S&P 500 companies that have reported. 
William Winkeler
About the Author

Bill has more than 12 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…

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3 Considerations to Enjoy Turkey Day 2023


As we approach the Thanksgiving holiday, our Dietitian, Sarah Rupp, MS, RD, LDN, shares some considerations around meal time.

We wish you all a bountiful Thanksgiving with family and friends!

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Stock Market Recap: May 2024


  • Markets rebounded after the first 5% drop in April, with all major stock and bond markets finishing May in positive territory.
  • Technology powered large cap growth higher (+5.99%, Russell 1000 Growth TR Index), leading all equity markets higher during the month. Small cap stocks rebounded during the month of May, with the Russell 2000 rising +5.02% (Russell 2000 TR Index). Outside the United States, developed international and emerging market equities both rose in May.
  • Major bond markets also rallied higher in May as investors’ outlook for interest rate cuts stabilized. The Barclays Aggregate Bond TR Index rose +1.70% in May.

Equity markets are off to a strong start to 2024, despite surprising persistence of inflation and higher-for-longer interest rates.

What has been driving markets higher through these headwinds?

This year has been characterized by improving fundamentals, both with corporate earnings and dividends rising above expectations. First quarter earnings for the S&P 500 have risen nearly twice the estimates from earlier in 2024, and investors have also increased 2025 earnings growth estimates to nearly +14%. Increased investments in technology, along with the supporting infrastructure, appear to have been underestimated by investors heading in 2024. Estimates for growth in 2024 and 2025 have also increased for US small cap stocks and international stocks.

Sources: Capital Group, FactSet. Earnings growth refers to annual change in earnings per share. As of May 14, 2024.

Dividends are also tracking ahead of expectations, thanks in part to an increase in dividend payments among technology companies. S&P Dow Jones estimates the S&P 500 dividend to increase by 6% in 2024, compared to a 5% increase in 2023. Over the long-run, stocks will follow fundamentals, and corporate earnings and dividends have been a positive surprise in 2024.

  • No rate cuts are expected, but investors will continue to focus on inflation data and Federal Reserve communication throughout the month.
William Winkeler
About the Author

Bill has more than 12 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…

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The Power of Associations in Your Diet and Lifestyle


The majority of adults in the United States lead busy lifestyles. Gone are the days where many of us just had ourselves to care for – now much of our time, energies and efforts are focused around raising children, nurturing important relationships, and excelling at work. Amidst the endless to-do list that accompanies daily life, most people still aspire to achieve and maintain good health.

What is considered to be “good health” and does one really ever “arrive” at this destination? If we define “health” as the state of complete physical, mental and social well-being – not merely the absence of disease or infirmity- then “good health” requires not only intentional efforts but also constant self-reflection on progress towards our goals. That’s where the term “associations” comes in.

Let me explain.

By definition, an association is a link between two or more things. From a psychological standpoint, an association refers to a mental connection between ideas, feelings and sensations. So, what does this have to do with achieving good health? Because we are complex humans with various needs, leading busy lives, taking a step back to evaluate what we are “attached/linked to” in the consistency of days and weeks, through the lens of our health goals, is wise. I’d argue many associations are made subtly, maybe unintentionally, but have the power to help or hinder progress towards whatever is being aimed to achieve.

Most people would agree that eating nutritious foods, exercising, getting quality sleep and stress management are key pillars to good health. With that in mind, the following are some examples of common associations (links, attachments) that could be disadvantageous for good health if participated in consistently:

  • Finishing the day winding down with a glass or bottle of wine before bed
  • Keeping an opened container of frosting in the fridge that can be easily (and often) accessed by spoon to satisfy a sweet craving
  • A cigar every time you are on the golf course
  • Grabbing a bag of candy at the gas station each time you fill up on gas
  • Bringing home a bakery treat each time you visit the grocery store
  • Sitting down to watch a show with a bag of potato chips
  • A beer with the guys or happy hour with the girls most weeknights because it’s cheap, fun and social
  • Hitting up your local drive-through after the kid’s sports practice or game, most nights of the week

These are specifically examples of common, every day activities that have been associated with patterns. “When I do this, I also have that”. This is not to be confused with associations that occur occasionally that would be less detrimental towards health. Life’s about balance, right?

But we are what we do consistently, and if unhealthful links and connections are made between activities and poor quality nutritional choices often enough, for example, your body will likely pay the consequences in the long-term.

Consequences of an unbalanced, poor-quality diet can manifest in various ways, such as the following:

  • Chronic disease onset like Type 2 Diabetes, heart disease, Alzheimer’s, and/or cancer
  • Or, they can imply manifest in the inflammatory state of living overweight or obese, skin issues, weak immune system, cognitive decline, decreased quality of life and increase healthcare costs.

Yikes!

On the flip side, some examples of positive, health-promoting associations could be the following:

  • Reading a paperback book before bed each night, phone placed on “do not disturb” and minimal blue light interactions to promote better sleep
  • Starting each meal at a restaurant with a side salad before bread or the main course
  • Avoiding the candy and bakery aisles of the grocery store because you know they’re triggers for you, and if you don’t buy it, you don’t have access to it
  • Upon getting home from work, choosing to walk the dog rather than unleashing him in the fenced in backyard (which would be easier)
  • Enjoying evening screen time with a show or movie without the need to snack mindlessly

It’s worth taking the time to personally think about the subtle connections and links between events and activities as it relates to food and beverage, as this could be a blind spot hindering positive progression towards better health.

Recognizing the power of associations is the first step towards positive change. Awareness is key. Be encouraged! You’re always just one choice away from making a healthier decision, and I’m here to support you on the journey.

Healthcare Disclaimer: This article offers educational insights from a registered dietitian on healthy eating principles. It is a supplementary resource and not a substitute for personalized advice from a medical professional familiar with an individual’s health history.

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Stock Market Recap: June 2024


  • Mega-cap growth companies rallied sharply higher in June, pushing the S&P 500 higher during the month (+3.59, S&P 500 TR Index). 
  • The rally in mega-cap growth companies opened a wide gap between growth and value in June: large cap growth rose +6.74% (Russell 1000 Growth TR Index), while large cap value fell -0.94% (Russell 1000 Value TR Index).
  • Interest rates fell as data showed a drop in the rate of inflation, which pushed bond markets higher during the month (+0.95%, Barclays US Aggregate Bond TR Index)

The outlook for corporate earnings has shifted higher- analysts now expect S&P 500 earnings to have grown +9% year-over-year the previous quarter. The increased growth expectations are driven in large part by a belief in the continued growth of investment in technology and alternative intelligence.

This reacceleration of growth expectations has resulted in the mega-cap companies representing a large portion of the S&P 500’s value: the top 10 companies in the S&P 500 make-up 37% of the index’s value, the largest weight since the index was created. The impact of the increased concentration in the top 10 companies can be seen in the difference between the index (+15.3% YTD, S&P 500 TR Index) and the average stock (+5.1% YTD, S&P 500 Equal Weighted TR Index).

There are high expectations for future growth in the top 10 companies of the S&P 500: their contribution to earnings over the last 12 months stands at roughly 27%, compared to a weight of 37%. This is a reminder for investors to maintain a diversified approach; markets such as US small cap stocks and international stocks offer lower valuations with an improving fundamental outlook.

Source: FactSet, Standard & Poor’s, J.P. Morgan Asset Management. The top 10 S&P 500 companies are based on the 10 largest index constituents at the beginning of each month. As of 5/31/2024, the top 10 companies in the index were MSFT (7.0%), AAPL (6.3%), NVDA (6.1%), AMZN (3.6%), META (2.3%), GOOGL (2.3%), GOOG (1.9%), BRK.B (1.7%), LLY (1.5%), JPM (1.3%), and AVGO (1.3%). The remaining stocks represent the rest of the 492 companies in the S&P 500.

  • Earnings season starts on July 12th; investors expect second quarter earnings to have grown +9% year/year. If earnings growth finishes that high, it would be the strongest quarterly growth rate since 2021.
William Winkeler
About the Author

Bill has more than 12 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…

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Are you Creating Space? Establishing New Habits


Although many of us have good intentions when it comes to prioritizing physical, mental and emotional health, the necessary action of consistency with establishing new habits to support these categories doesn’t just happen overnight.

Most of us can identify areas in our daily routines that need improvement. However, factors such as energy levels, time and effort required, childcare availability, and finances can present significant obstacles to making beneficial changes. As a result, most of us continue on the path that works “well enough” for the short term, even if it’s not ideal. The issue typically isn’t a lack of desire or knowledge to make changes, but rather the absence of a conducive environment for these changes to take root and flourish. In other words, a space needs to be created for change to happen.

Take healthy eating for example. It’s something you know you want to do more consistently, it’s something you know would be beneficial to your short and long term health, but you can’t seem to bring yourself to take inventory of your fridge and pantry to begin to stock quality items in your home, to set yourself up for success. Or maybe preparing food is a barrier. You have access to cooking and food prep videos and articles at your fingertips, but where in your schedule have you created time to prepare then execute actually trying it yourself?

Peeling back the layers on why good intentions don’t necessarily translate to actions can be painful and humbling. It’s caused many of us to stay stuck in the same place, in different areas of our lives, for a long time. So, what’s the solution?

It’s time to stop fooling ourselves that changes just happen without our concentrated effort. If we fail to plan, we plan to fail. Once evaluated that a certain tweak/change would be advantageous, it’s time to take the step to create the structured space in the schedule where a new habit can take root. Keep it simple. Narrow the focus. Most of us are juggling many “glass balls” that we cannot afford to drop and have shattered. An example of this would be personal health, which too often can be put on the backburner for a time period out of practical necessity, but where does this lead to in the long run? Consider this encouragement to start where you are.

Here are some tips for getting started:

1. Identify. What is really frustrating you about your daily or weekly routine? Frustration is a driver to change. Be specific here. If you just focused on what was frustrating and what would make it less frustrating/better, what would it be?

2. Reserve. Pick a time in your schedule and dedicate yourself to education (self-education through reading, watching how-to videos, podcasts, in person professional help), as you prepare to make a change.

3. Clarify. Write down a clear goal and put it somewhere you can see it daily, as a reminder to yourself.

4. Take Action. Go and do it! It’s time to execute rather than thinking about it anymore!

5. Practice this for small habit changes or big habit changes. Enlist accountability people as desired. Pat yourself on the back for taking a step of action.

My goals may differ from yours, and in fact, they likely do, spanning personal to professional aspirations. However, the implementation of self-discipline to commit to change and adapt to new ways of living will likely positively impact all areas of your life.

“If you talk about it, it’s a dream, if you envision it, it’s possible, but if you schedule it, it’s real”. Let’s have less talk, more scheduled action and a space created for ourselves to actually adopt behavior change. Cheering you on today!

Disclaimer: This article offers educational insights from a registered dietitian on establishing healthy principles. It is a supplementary resource and not a substitute for personalized advice from a medical professional familiar with an individual’s health history.

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Organic or Conventional? Equip Yourself to Make the Best Choice for Your Health


Label reading, ingredient decoding, deciphering marketing terminology – all of these aspects individually or combined can create an environment of confusion for shoppers at the grocery store. Amongst product labels, “USDA Organic” is found on many foods and beverages, but what does it really mean? Let’s focus in and unpack this particular label.

What is meant by the label “USDA Organic”?

The United States Department of Agriculture (USDA), is a division within the US government that focuses largely on the country’s safety and efficiency of farming, food and sustainability practices. The USDA Organic label is federally regulated, meaning the product its placed upon has met the standard requirements to earn the status of this particular label (more on this, below). Because this is a regulated label with strict criteria, the consumer can have confidence when they see this symbol on a product that the process in which the ingredients have gone from farm to table has been verified through a system of checks and balances.

  • The standards the USDA has set for being labeled organic are the following¹:
    • No synthetic chemicals used on the product (such as pesticides and fertilizers otherwise used in conventional foods to keep bugs and termites away)
    • No genetically modified organisms (GMO’s)
    • No antibiotics or growth hormones given to animals (when the product itself comes from an animal) but rather a focus on their welfare, such as raising animals in natural conditions
    • Sustainable farming practices used to protect the environment currently and long term

These standards are in place to ensure both the consumers and environment are set up for better health outcomes, given how products are grown and processed. More information surrounding these categories can be found on the USDA website.

If a food product does not have this label, the default is known as a conventional food.  A conventionally grown product such as a head of broccoli, for example, could miss the mark for organic in a minimum of one category or at most, all categories. Conventional foods are found in most products in store and have their own system of checks and balances for consumer health, as well.

Whereas conventional foods are still federally monitored for safe limits of pesticides using scientific data and risk assessment on a regular basis, these types of products do not have to meet as rigorous requirements surrounding chemical usage on crops and soil health, for example. Additionally, they may utilize GMO’s, and/or differ in the treatment of animals and farming practices.

In summary, organic verified products have tighter regulations when it comes to how a food is grown and processed, and also how animals are fed and raised. Common concerns from consumers regarding conventional foods vs. organic surround long term pesticide intake risk on human health, animal welfare, and the question of varying levels of nutrient composition. Given the increased cost of production to farm organically, organic products most often have a higher price tag than their conventional counterparts. Many believe there are benefits to choosing organic, but it may not be necessary or realistic to consume all or even most food intake organic, depending on food budget and/or availability of items where someone lives and shops on a regular basis.

When it comes to a measurable benefit to human health, choosing organic foods vs. conventional, the scientific evidence is not definitive, although observational studies point to better health outcomes over time for organic consumption vs. conventional². Like any decision in the adult world, the type of food you purchase requires taking inventory of what you value, prefer, and can afford.

If at this point you’ve identified you’d find it worth the money and efforts to choose organic, in some capacity, for yourself and family, it can be helpful to have a simple starting point.

Each year, the Environmental Working Group (EWG), a non-profit organization whose focus is public health and the environment, releases two lists – the dirty dozen and clean fifteen. These lists are considered “shopper’s guides” for the consumer who wants to better understand which foods have been tested and shown to have a greater amount of pesticide residue (dirty dozen) compared to produce with less or no traces of pesticides (clean fifteen). This is a great place to begin for a consumer who desires to limit pesticide residue on food they’re consuming, due to potential health risks associated with chemical exposure for adults and children, alike.

2024 Dirty Dozen³ – EWG recommends to buy these organic, when possible, to avoid concentration of pesticides:

  • Strawberry
  • Spinach
  • Kale, collard & mustard greens
  • Grapes
  • Peaches
  • Pears
  • Nectarines
  • Apples
  • Bell and hot peppers
  • Cherries
  • Blueberries
  • Green beans  

2024 Clean Fifteen⁴ – EWG reports least contaminated with pesticides, among produce tested. OK to buy conventional:

  • Carrots
  • Sweet potatoes
  • Mangoes
  • Mushrooms
  • Watermelon
  • Cabbage
  • Kiwi
  • Honeydew melon
  • Asparagus
  • Sweet peas
  • Papaya
  • Onions
  • Pineapple
  • Sweet corn
  • Avocadoes

You can request a copy of these lists from the EWG website, print them out for your fridge or screenshot them for your next trip to the grocery store. You can also take a deeper dive to learn more about the EWG’s process for food testing on their website.

When it comes to eating nutritiously by principle, it’s best to consume whole foods, as close to natural form as possible, and a variety of types within each food group (fruits, vegetables, fats, proteins, whole grains, dairy). If a fixation on choosing organic vs. conventional is presenting as a hindrance from eating animal products or produce, that may be missing the point for what healthy eating actually looks like. The term organic isn’t necessarily synonymous for better health, so it’s important to view the whole picture.

As a consumer, it’s important to be aware of common food labels such as “USDA Organic” on products like meat, dairy, fruits, vegetables, eggs and other processed foods. Understanding what the term implies can assist in avoiding conflicting information and confusion, in this area. The choice of conventional vs. organic is yours, and it’s a personal one. My hope is that you feel better acquainted with the facts and are empowered to make your choices with confidence!

Sources:

  1. McEvoy, Miles. 2012, March 22. Organic 101: What the USDA Organic Label Means. USDA. https://www.usda.gov/media/blog/2012/03/22/organic-101-what-usda-organic-label-means
  2. Vigar, V., Myers, S., Oliver, C., Arellano, J., Robinson, S., & Leifert, C. (2019). A Systematic Review of Organic Versus Conventional Food Consumption: Is There a Measurable Benefit on Human Health?. Nutrients12(1), 7. https://doi.org/10.3390/nu12010007
  3. EWG’s Shoppers Guide to Pesticides in Produce: The Dirty Dozen. Environmental Working Group. https://www.ewg.org/foodnews/dirty-dozen.php
  4. EWG’s Shoppers Guide to Pesticides in Produce: The Clean Fifteen. Environmental Working Group. https://www.ewg.org/foodnews/clean-fifteen.php

Disclaimer: This article offers educational insights from a registered dietitian on establishing healthy principles. It is a supplementary resource and not a substitute for personalized advice from a medical professional familiar with an individual’s health history.

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Maximize Your Year End Giving: Charitable Planning Strategies for Individuals


As the end of the year approaches, it’s an opportune time for clients to utilize strategies that align charitable goals with their financial objectives. In this article, we will explore various charitable planning opportunities and strategies to leverage to help our clients optimize their giving while improving their overall financial situation.

One of the primary incentives for charitable giving is the potential to reduce taxable income. However, timing and method play a crucial role in maximizing these benefits. Below are several techniques to consider as part of year-end planning:

  • Avoiding Capital Gains Tax: Donors avoid paying capital gains tax on the appreciation of the asset.
  • Maximized Tax Deduction: They receive a charitable deduction for the fair market value of the donated securities, provided they’ve held the asset for more than one year.
  • Watch Your Limits: The IRS places limits on the amount clients can deduct for charitable contributions. For cash donations, the limit is typically 60% of AGI, while donations of appreciated assets are limited to 30% of AGI. If the total contributions exceed these limits, the excess can be carried forward for up to five years.
  • Helps Portfolios: This strategy is particularly useful in bull markets, where many clients may have appreciated assets they would otherwise sell to rebalance their portfolios.
  • Satisfies Required Minimum Distributions (RMDs): For clients who have reached their required beginning date, QCDs can reduce taxable income by offsetting RMDs.  However you need to be careful to make QCDs first, before taking any other income yourself.  The first dollars out of a qualified account are the RMD dollars; if you take your RMD first and then try to make a QCD later, it won’t count.
  • Tax-Free Distribution: Unlike regular withdrawals, the QCD is excluded from the client’s taxable income, offering a substantial benefit for those who don’t itemize deductions, which can help clients stay within lower tax brackets or avoid Medicare premium increases.
  • This strategy is particularly advantageous for clients who may no longer need the full amount of their RMD for living expenses but are still required to take it.

One way to implement this is through a Donor-Advised Fund (DAF):

  • Clients can make a lump-sum contribution to a DAF and receive an immediate tax deduction.
  • In subsequent years, the client can take the standard deduction and not make additional charitable contributions until the next “bunching” year.
  • The funds can be distributed to charities over several years allowing donors to maintain their philanthropic commitments.
  • It’s ideal for clients facing a windfall year or who have highly appreciated assets they wish to donate.
  • For clients seeking to create a structured giving plan, or for those who may not have specific charities in mind yet, a DAF can serve as a helpful intermediary.
  • Generate Income Streams: Charitable trusts allow donors to convert highly appreciated assets into a steady income. For example, with a Charitable Remainder Trust (CRT), donors or their beneficiaries receive a fixed or variable income for life or a specified period. This can be an attractive option for retirees or clients seeking supplemental income while also supporting charities in the future.
  • Grow the Legacy: One of the most significant benefits of charitable trusts is the potential to transfer appreciated assets, such as real estate or stocks, without triggering capital gains taxes.  When assets are placed into a Charitable Remainder Trust (CRT) and sold, the proceeds are untaxed to the trust, allowing more principal to be retained for both income generation and charitable legacies.
  • Immediate Tax Deduction: Contributions to a charitable trust are eligible for an immediate charitable deduction, based on the present value of the future charitable donation. This deduction can help offset taxable income in the year of the contribution, providing immediate tax relief.

Your wealth manager can help you formulate a personalized year-end charitable giving plan. Here’s a checklist approach to developing it:

  1. Identify Charitable Goals: What causes are important to you?
  2. Review Taxable Income: Determine whether itemizing or taking the standard deduction makes sense.
  3. Evaluate Assets: Identify appreciated securities or other assets that could be donated.
  4. Consider Timing: Ensure donations are made before December 31 to qualify for the current tax year.
  5. Explore Donor-Advised Funds: If clients plan to give over multiple years, DAFs may be an optimal solution.
  6. Engage Family: Involve family members in the charitable conversation.
  7. Check Matching Programs: Encourage clients to explore employer matching gift
Chuck Zuzak
About the Author

Chuck joins Confluence Financial Partners with 13 years of experience in the financial services industry, most recently as Director of Financial Planning at JFS Wealth Advisors. At a fundamental level, Chuck’s passion for…

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Monthly 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:

William Winkeler
About the Author

Bill has more than 12 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…

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Stock Market Recap: August 2024


  • 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%.

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.

  • 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 12 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…

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