While April brought much-needed showers to Texas, the markets, which had been on fire for much of the previous 8 months, also had a little water tossed on them. The S&P 500 finished April down 3.27%, the NASDAQ was down 3.59% and the Dow finished down 3.46%.
Perhaps the most common theme we heard from clients this month centered on the upcoming rematch between former President Trump and reigning President Biden. Many investors are peppering questions about what the contest will mean to their portfolios while many strategists have been trying to sketch out the implications of a blue or red win.
Without question, the next President will need to steer us through a terrible immigration problem, choose the next leader of the Federal Reserve, manage heightened global tensions with the war between Russia and Ukraine, escalating conflicts in the Middle East, and long-term implications of our love/hate relationship with China. Just two weeks before Warren Buffet’s partner Chalie Munger passed, in an interview with CNBC’s Becky Quick, Charlie said that the job of President of the United States is too big and too complicated for one person and in his words “it can’t be fixed”.
You’ve probably heard the old saying “History doesn’t repeat itself, but it rhymes”. Historically during election years, the markets are choppy and even a little bit flat through June only to finish the year positive, on average, just under 8%. When broken down by who wins, the markets tend to outperform when there is a blue President versus when there is a red President.
The real issues are that sticky Inflation remains around 2.6% above the Fed goal of 2% while GDP growth rate is expected to clock in at 1.6% well below the 2.4% that the market expected in January. Hmm, sticky inflation and slower GDP, can you say “stagflation”? Which is the worst-case scenario for the stock market. I certainly hope we do not have an extended period of stagflation. Time will tell.
In this month of graduation, the Wall Street Journal reported that based on the median salary, ten years after graduation, approximately 85% of college degrees (the college major) do not provide a positive return on investment (ROI). Only the degrees where the student graduates with a specific set of skills such as medical, legal, or engineering provide a positive ROI.
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Have a question? Let me know! Email me at kcompton@wcmtexas.com.