“If they don’t give you a seat at the table, bring a folding chair.” – U.S. Congresswoman Shirley Chisholm (1924-2005).
Welcome to another episode of “Ethel’s Diamond Post.” We just concluded the first quarter of 2024. With the Easter holiday hitting early this year, this is a short week due to the market being closed for Good Friday. Plus, we have celebrated the month of March for Women’s History Month. This is an essential celebration for me as an African-American woman who owns 100% of a Registered Investment Advisory firm. I think about how many women have paid the price for me to be one of the few minority-own investment firms in the country. Wow! I honor women’s contributions to our history, culture, and society. We celebrate and pay tribute to all women, past and present, for their trailblazing efforts and results.
We ended 2023 with a better-than-expected performance seen by the S&P 500 Index. Yet, with so many factors weighing on the economy, no one’s crystal ball could accurately depict what the first quarter of 2024 would bring. The capital markets took over-the-counter Rolaids to overcome digestion problems, including the regional banking debacle, geopolitical turmoil, and a robust bull market. Yet, the S&P 500 delivered a 10.7% return during the year’s first three months. The best first-quarter performance since 2019. Other indices, including the Dow Jones Industrial Average and the Nasdaq Composite, gained 5.6 % and 9.1% percent, respectively. The S&P 500 ended yesterday on a 22nd record-high close of the year. The top 2024 stock market performers included some healthcare stocks with unique value propositions and artificial intelligence stocks. Everything from stocks to bitcoin to gold hit new record highs to start the year with a robust performance.
The capital markets avoided a recession and gained a strong labor market fueled by robust corporate earnings, which is a “waiting to exhale” moment for analysts and investors – alike. Yet, we anticipated that the Federal Reserve would begin the first of six rate cuts this year in March. Our intuition and speculation failed us again, for the Federal Reserve predicts three cuts, likely beginning in June or July. However, I would not hold my breath if the timeframe changes again.
We rebalanced several times to preserve our gains; many have delivered over 100% year-to-date. The market expanded beyond the Magnificent Seven technology stocks, for we added a few new companies, including but not limited to – Deckers Outdoor (DECK), DraftKings (DKNG), and Elf Beauty (ELF), to name a few. When appropriate and reviewing tax implications individually, we will continue to take profits to minimize risk and overvalued evaluations.
Many respected analysts believe the market will continue to climb despite the odds. The market surge is driven by the economy’s continued strength, with consumers continuing to open their wallets. Remember the “Goldilocks and the Three Bears” story where Goldilocks tries the bears’ porridge. The first is too hot, the second is too cold, and the third is “just right.” Much like the fairy tale, it defines a period where economic conditions work together in balance or favorably. We describe this as a potential Goldilocks economy for U.S. growth that is more substantial than expected and tame inflation, allowing the Federal Reserve to cut rates aggressively.
For the most part, the labor market strength has been in the “red hot” levels, as shown in the January jobs report. The labor report pushed back the recession call that was a consensus just a year ago. Plus, the Gross Domestic Product (GDP) grew at an annualized rate of 3.3% in the fourth quarter of last year. The result is that US consumers remain strong and resilient, with an average real spending power of more than $1,400 more than pre-pandemic levels. The Federal Reserve officials have consistently said they seek evidence that prices are cooling before cutting interest rates. Inflation is moving in the right direction; the ultimate goal is a 2 percent target.
Over three-quarters of the S&P 500 companies have reported earnings, and most are beating estimates. Such a positive earnings season reinforces that US profit growth is rebounding after a near-flat outcome for 2023. The strong quarter for all three indexes came in the final months of 2023 when a group of Big Tech stocks, dubbed the Magnificent Seven, pulled the market higher. We are looking for earnings per share for S&P 500 names to grow 8 percent in 2024 and 6 percent in 2025, primarily for artificial intelligence (AL). Artificial intelligence fueled a massive surge, especially with the stunning earnings report from Nvidia (NVDA). Generative artificial intelligence tools are already significantly impacting productivity and infrastructure expansion.
Nothing stays the same for some Magnificent Seven technology companies that have stumbled after fueling last year’s banner rally. Apple (AAPL) shares fell 11% during the first quarter, stemmed by worries about lackluster sales in China. Following the trend, Telsa (TSLA) shares declined by 29.3 percent, and Alphabet (GOOGL) gained a modest 8 percent so far, trailing behind the double-digit players including Nvidia (NVDA), Meta (META), Microsoft (MSFT), and Amazon (AMZN).
VZD CAPITAL MANAGEMENT, LLC believes that dollar-cost averaging and rebalancing are the two most essential factors in facing the upcoming days ahead. Some market indicators suggest stocks are overvalued compared with the economy’s performance. We look at insider trading, for we have witnessed recent stock sales from Amazon’s Jeff Bezos, Meta’s Mark Zuckerberg, and JPMorgan’s Jamie Dimon. We continue to monitor all aspects of the capital markets and have diversified into fixed income by purchasing exchange-traded short-term to intermediate-term bonds for income generation. As you know, we are not a “ride and die” firm, for we are active in buying, selling, and monitoring all positions to ensure the continued financial health of our valued clients.
We remain focused on compliance amendments and taxes for March and April. The Securities and Exchange Commissioners and State Commissioners make updating the ADV Part 2A and 2B mandatory by the end of March. We have updated the website – www.vzdcap.com with the new version and will send compliance letters to all clients within the coming weeks. Plus, we will schedule quarterly meetings to discuss each client’s investment objectives and tax considerations and map out a customized roadmap to ensure the portfolio(s) align with your short and long-term goals.
Ethel has been awarded the Five-Star Wealth award for 2024. She is a 10-year winner and continues to advocate for wealth management services for individuals, multigenerational families, and estates. Nikisha has implemented new processes, changing the landscape with the latest software and spearheading the compliance mandates. Nathan Salary is the newest member of the Executive Mentoring program. He focuses on bringing new ideas to VZD by creating digital content for the social media platforms. We are exploring new possibilities and hope you will complement our efforts by referring your friends and family to our boutique firm – where clients come first.
Thank you for your continued support and patronage. We are honored to serve as your wealth management team. We wish you and your family a happy, holy day weekend.
With Gratitude,
Ethel, Nikisha, and Nathan
