I hope this newsletter finds you well and enjoying the summer months!
As we conclude the second quarter of 2024 and begin the second half of the year, I am pleased to provide you with an overview of the financial and economic markets. This quarter (yes, even the entire first half of the year) has been eventful, with significant developments across various sectors. Even as I write this a couple of weeks into July, I find major shifts in performance.
Before we dive into the key highlights, I’d like to take a moment to reflect on a couple emails I sent recently that have resonated very well with many of you based on the feedback I’ve received. If you would like me to resend one or both, I’d be happy to, just send me an email or call me to request it.
The first was “Safeguard Your Digital Estate”. So much of our lives has been pushed to the internet in the last 20 years that many people don’t even remember what a “photo album” is! So, where did all of these pictures go? Of trips, family members, friends, etc.? Short answer, they’re in the “cloud”. In other words, saved for the future, at a technology storage facility called a Data Center. Only accessible through the internet.
So, what happens when you’re gone? How does your family access them? That’s what this email was about. I also have a very nice document available on my website called “Peace of Mind Checklist” that offers a central location for all of important documents and contacts. Click HERE to go directly to that document so you can download it! Or you can go to my website, www.smcwealthmanagement.com, hover your mouse of “Resource Center” at the top of the page and the first selection is the Checklist.
Passwords to various accounts and websites are a key component. I use a password storage program called LastPass to keep all of my passwords in one safe location. But you need a password to gain access to it! Bottom line, you need to figure out where to store this type of information that can be accessed without the internet. A great place to start is a safe in your home or a safe deposit box at your bank (yes, many still have them!).
And don’t forget about the Client Planning Portal! It is a fantastic tool to quickly access your account information, store important documents, share the folders with loved ones and/or trusted contacts and with me (like Wills and Trust documents). If you haven’t activated your Portal, please reach out to me. I can walk you through it and help you even set up access on your smartphone or tablet. With the same security you find with your online bank access, you can rest assured that unsavory eyes aren’t able to gain access to it.
The second email, caused a quite a few of you to reach out to me to get on my calendar! It was titled “It’s Mid-Year, Let’s Connect”. My opinion is that anytime is a great time, but mid-year is a nice place to start. In the email I detailed areas where you may have experienced change in your life. Oftentimes these are great indicators to reach out to me as they could impact the funds you need or the allocation of your accounts. I have time to meet via Zoom or phone call with you, just make an appointment with me via my online scheduler: 
Market Overview
When we look back at the last few months, there were a lot of things happening around the world that made people unsure about the future. Also, the next US presidential election is coming up, which adds to the uncertainty. This underscores the importance of diversification.
Diversification is a fundamental principle in portfolio management. Here's why it's valuable:
- Potential for Risk Reduction:
- Diversifying across different asset classes (stocks, bonds, real estate, etc.) helps mitigate risk.
- When one investment performs poorly, others may offset the losses, reducing overall portfolio volatility.
- Potential for Enhanced Returns:
- Diversification allows exposure to various market segments.
- While some assets decline, others may rise, potentially enhancing overall returns.
- Market Cycles:
- Different assets perform well in different economic conditions.
- Diversification ensures you're not overly reliant on a single market cycle.
Remember, diversification doesn't guarantee profits or prevent losses, but it's a prudent strategy for long-term investors.
While US stock market returns were significant for the 2nd quarter, a majority of the gains came from just 10 stocks in the S&P500, accounting for 37% of the index. Seven of those 10 (also known as the Magnificent 7: Apple, Amazon, Alphabet, Meta, Microsoft, Nvidia and Tesla) made up an astounding 31% of the index return.1 This underscores the importance of looking at concentration.
Concentration risk refers to the potential for financial loss due to an overexposure to a single asset, sector, or geographic region. Here are some key risks associated with concentration:
- Market Fluctuations: Overexposure to a particular asset or sector can make your portfolio more vulnerable to market volatility. If that specific asset or sector performs poorly, it can significantly impact your overall returns.
- Economic Downturns: Concentration in a single geographic region or sector can expose your investments to regional economic downturns or sector-specific issues. For example, if you invest heavily in the tech sector and it faces a downturn, your portfolio could suffer substantial losses.
- Overconfidence: Believing too strongly in the performance of a particular asset or sector can lead to overexposure and increased vulnerability to adverse events.
To mitigate these risks, I believe that diversification is key. By spreading your investments across various assets, asset classes, sectors, industries, etc., you can reduce the impact of any single investment's poor performance on your overall portfolio. Is there a specific sector or asset you're concerned about in your portfolio? Let’s talk about it!
Diversification and concentration are factors I review when allocating portfolios or introducing a new holding to a portfolio for you. It’s not as simple as “it’s a good fund with a good manager, buy it!”
Looking at the asset class returns below; you can see the disparity between each one. This disparity can be different every day, week, month, quarter, year, etc. showing the importance of diversification.
Looking Ahead
As we move into the second half of 2024, I remain optimistic about the investment landscape for both equities and fixed income. While challenges are there, opportunities exist for those who stay informed and proactive. I am committed to guiding you through these times with insightful analysis and strategic advice.
So, what am I paying closer attention to over the coming months? The presidential election, inflation, interest rates and geopolitical risk. I still believe that maintaining positions in high quality, profitable companies, whether small, medium or large, will be beneficial to your portfolios. I’m also beginning to move back into bonds from money markets as interest rates begin to fall, this has the potential to produce additional return beyond the interest earned from the bonds. Another way to add growth to your portfolio from an unlikely source!
As always, I find purpose, enjoy working with you, and truly appreciate your decision to work with me to reach your financial goals and plan for the future. As a valued and important client, I thank you for your trust and confidence in me.
To access last quarter’s Quarterly Market Insights video, click the QMI picture below:
Should you have any questions or need further information, please do not hesitate to contact me. I’m just an email (larry@smcwealthmanagement.com), phone call (949-306-0060) or text (949-619-6916) away!
All the best,
Larry Qvistgaard