By Pat Culverhouse
Tracy Campbell looks at many economic indicators before giving financial advice to his clients at Meriwether Wealth and Planning. After studying current and past market information, his view of 2024 is one of “cautious optimism.”
Pointing to this year’s early market performance, Campbell outlined some positive financial news for members of the Minden Lions Club.
“The Dow (Jones) and S&P (500 Index) have shown record closures after only 38 days this year,” he said. “Corporate earnings are strong…the Fed signaled we will wait a few more months before rate cuts.”
And, Campbell said, there’s a wild card that could play a part in gains for investors during 2024.
“It’s a presidential year. The stock market typically makes moderate gains in an election year,” he said. “There has been an average of a seven percent gain in the S&P 500 during presidential election years since 1952. Historical performance may not always reflect the future, but it sounds like from a lot of good indicators that this may not be such a bad year after all.”
While his optimism is cautious, Cambell there are other indicators that investors should watch.
“There are some market headwinds we need to take note of. Banks have tightened lending standards…it’s harder to borrow big money,” he said. “There are rising consumer delinquencies and that’s not a problem that fixes itself. We have high interest rates moving forward and it looks like it will take longer to come down.”
Campbell said lower and middle income families are not saving money as they did in the past as they try to keep up with rising expenses like groceries and utilities. Some are taking second jobs to make ends meet while others have had to stop contributing to their 401K plans.
“We have seen a 25 percent increase in grocery costs in the last four years. It has outpaced inflation,” he pointed out. “We’re also at an all-time high in consumer debt, particularly credit card debt. There is financial stress on the American consumer with more people carrying more debt for longer periods of time on credit cards, especially with 25 to 29 percent interest on credit cards.”
Campbell said a report only days prior to his presentation for the Lions Club showed credit and auto loans pushed past pre-pandemic levels, with more than one trillion dollars in debt on credit cards carried by U.S. consumers.
Campbell said it’s important to know where the country has been financially to know where we’re heading. Looking back at 2023, he pointed to growth patterns that helped avoid a recession.
“The labor market was strong, signifiant government spending helped inflation drop, the economy grew by 2.4 percent and there was strong job growth with low unemployment,” he said. “The S&P was up 26 percent and NASDAQ was up 23 percent”
Much of the market’s success in 2023 could be traced to the performance of a group of stocks referred to among analysts as the “Magnificent Seven.” That group included familiar names like Amazon, Apple, Google and Facebook. Campbell said the group more than doubled and helped the NASDAQ performance.
Campbell said there is no “cookie-cutter” advice for investors, noting that each individual has needs unique to his situation. His first piece of advice: Have a financial advisor and talk to them.
“You want to have a plan in place that needs to match your risk tolerance,” he said. “Not everyone needs to be in the stock market. Some might need a fixed income solution like CDs or cash. And when interest rates come down, bond prices go up. Bonds might be more attractive than they have been.”
Most analysts predict earnings and revenue growth in all 11 market sectors during 2024, he said, “…with many agreeing that healthcare and information technology will be leading the pack. Mature market positions are committed to innovation and technology will continue to thrive.”
While the push to green energy will continue, Campbell said he believes there will still be a place for natural resources.
“I believe the future has a place for green energy, but oil and gas isn’t going anywhere soon in my opinion. Oil and gas stocks can still be considered as part of your investments,” he said.
Investors should also stick to domestic stocks when filling their investment portfolio, he said.
“U.S. stocks have performed better than international stocks,” Campbell said. “Even with all the turmoil, U.S. stocks hammered the others.”
Campbell said Meriwether partners with a company that provides 20 different economic indicators telling what will impact the economy for the next six to nine months. Indicators are given three levels: Red levels are heading in a negative direction; yellows are remaining neutral or flat; greens are moving in a positive direction.
“Our February report shows 18 indicators in the yellow and two in red,” he said. “That’s with the geo political risks and equity market valuation. It’s the best report we’ve seen in seven months.”
Currently, Campbell said, stocks are expensive and many are overpriced. Investors, especially young investors, should rely on a financial advisor to help plan their future.
“I believe the best advice is to stay balanced, diversified and vested. It’s more important to focus on the long term to reach your financial goals,” he said.