Q2 2024 Halftime Letter
July 9th, 2024
Dear Valued Client:
Enclosed are your reports and spreadsheets (Clients with assets over $500,000) for the period ending June 30, 2024. There are also educational materials, updates, and outlooks enclosed with this package.
Market Recap and Outlook
As of the middle point of the year, stocks have reached new highs due to interest rate cut expectations, falling Treasury yields, and continued earnings growth from mostly Artificial Intelligence (A-I) linked tech companies.
We have maintained that equity markets will move, in the short term, with news that impacts interest rates and that has been true. What many clients may NOT realize is that the moves in most market indexes are attributable to just a few companies.
As an example, the Dow Jones Industrial Average is up 4.79% on a YTD basis, but the tech-heavy Nasdaq is up 17.47% on a YTD basis thanks mostly due to a few A-I firms. Client performance numbers look good versus any reasonable metric.
From a valuation perspective, the consensus earnings on the S&P500 for the current year (2024) are between $235 to $245 per share (*). Earnings expectations for the year 2025 are expected to be $260 to $290 per share (*). If we use the midpoint estimate for the year 2025 of $275 and divide that by 5%, we reach a current estimated valuation for the S&P500 of 5,500. That is about where the market is trading as of this date. Accordingly, we find the market “fairly valued” to “slightly over-valued”. We recently did a minor re-balance to take some profits in equities. Clients are advised to call our office if you are investing large lump sums.
As we begin the second half of 2024, there are four areas to focus on to see which way the markets move.
The first area focuses on whether we get a “soft landing” or “hard landing” with our economy. Keep your eye on economic indicators such as jobless claims, the unemployment rate, manufacturing index, and inflation data. If the data is decent/good, markets should react positively.
The second area is earnings, with a particular focus on A-I earnings. Since A-I earnings have led the market higher, solid earnings will help the overall markets move forward. If earnings miss in this area, the opposite could hold true.
The third area is the Federal Reserve. If we get a rate cut in September, we expect a market rally. If rate cuts are delayed until 2025, the market should react negatively.
The fourth area involves geopolitics. There are rising risks of an Israel/Hezbollah war, the ongoing Ukraine/Russia war, and political uncertainty in Europe. We have attached a piece on the US Presidential Election as well.
All these above-mentioned scenarios will impact the market in the shorter-term, meaning two years or less. Our advice is to focus on your long-term investing goals, whether you are in the accumulation stage or even in the distribution phase of your financial plan. We are on top of your situation and are happy to sit down with you if you would like a financial check-up.
Regarding the US Presidential election, there will be important events happening regarding Fiscal Policy. The “Trump Tax Cuts” are expiring at the end of 2025. Depending on who wins the Presidency and who controls Congress, this could have a major impact on tax law. Since we do not know who will win the election, we will reserve our advice until we have a clearer understanding of what the rules will be and what strategies we can use.
Please see the accompanying update from Invesco for more information.
Wealth Management Issues
We advise you to stick with the fundamentals. Regarding your investments, our team works hard to make sure your money is matched to your quantified financial goals. If there has been a change in your situation, please contact our office.
With respect to your insurance needs, please contact our office if you would like a check-up on your life, disability, and long-term care insurance.
Please make sure your will is up to date and that your beneficiary designations are correct. Your spreadsheet will show that information on investments that require that information.
If you need a tax projection done, please contact our office between Labor Day and Thanksgiving to make sure you are in good shape.
Office Updates
We have two new employees that we have added to our staff due to the recent growth we have experienced:
Dan Koppell joins our team as a Tax/Accounting Associate. He has a degree in Accounting from Rutgers (Newark) and has public accounting experience. He recently passed all four parts of the CPA exam on the first try and will gain the designation shortly after completing his experience/education requirements.
Casey Cavasin joins our team as a Client Service Associate. He has a degree in Finance from Rutgers and plans on pursuing various licenses and designations needed for a successful career in the business.
The staff additions will free up Jason and Anthony to see more clients, especially those out-of-state.
Thank You!
Our firm was recently honored at the Avantax Elite Advisor Summit in the Bahamas as one of the top firms in the country. Accounting Today Magazine listed our firm as one of the TOP 150 Accounting/Wealth Management CPA firms in the country and Advisor Hub listed Jack as one of the TOP ADVISORS TO WATCH in 2024.
We are a firm that now has twelve employees with seven that have not reached their 40th birthday. Five members of our staff have passed the CPA exam, and one other is a candidate. Four members of our staff have passed the CFP exam with two others being candidates. Our website was recently updated with bios of all staff members. Please visit oujowealthstrategies.com if you would like more information about our team.
Our AUM is just shy of $700 million as of this moment. This is incredible considering we are organic and have not had any mergers or acquisitions. All our client base has come from your referrals and recommendations. We are a firm that is focused on an overwhelmingly positive client experience.
When you ask, “Are you taking on new clients?”, please remember that these young people will be here for many years to come, and we are in an excellent position to carry the firm forward for many years.
Thank you for your business and please call us if you want to come in for a financial check-up.
Sincerely,
Jack Oujo, CPA/PFS, CFP®, CSA, MS (Taxation)
Oujo Wealth Strategies
1540 Highway 138, Suite 106, Wall, NJ 07719
732-556-4211-Direct Dial
908-675-5571 – Cell
732-681-4479-Fax
Disclosures
- Investment Recommendation Disclosure: The client acknowledges that the representative is relying upon the client information (e.g. risk tolerance, time horizon, and investment objective) for the purposes of providing recommendations to the client. The client agrees to give the representative notice of any significant changes in the client information and to provide the representative with any additional information that the advisor may reasonably request.
- Historical Performance Disclosure: Past performance is not indicative of future results. The investment return and principal value will fluctuate with the market. Investor’s shares when redeemed may be more or less than their original cost.
- General Market/Investment Risk Disclosure: Investments are subject to market risks including the potential loss of principal invested. Yields and prices will fluctuate along with the market and other economic conditions. Securities may be worth less than the original cost when redeemed.
- Information Disclosure: The information contained herein has been obtained from sources considered to be reliable, but Avantax does not guarantee the accuracy or completeness of any statement.
- A portion of municipal bond’s income may be subject to state or local taxes. A portion of a municipal bond’s income may be subject to the federal alternative minimum tax. Investing in municipal securities can be volatile and include such risks as: adverse tax or court rulings, legislative or political changes, market and economic conditions, issuer, industry-specific (including the credit quality of municipal insurers), and other conditions.
- The Avantax affiliated companies exclusively provide financial products and services, and do not provide or supervise tax or accounting services. Advisors may provide tax, accounting or other services through their independent outside businesses, but these services are separate and apart from Avantax.
- Standard & Poor’s is a corporation that rates stocks and corporate and municipal bonds according to risk profiles. The S&P 500 is an index of 500 major, large-cap U.S. corporations. You cannot invest directly in an index.
- The attached articles were created by third parties. They were not written or created by Oujo Wealth Strategies and do not represent the views and opinions of Avantax Wealth Management® or its subsidiaries.
(*) Performance and Data numbers are per Morningstar and the Sevens Report. Client spreadsheets are normally sent four times per year to clients with over $750,000 of investment assets and twice per year for clients at the $500,000 to $749,999 level.
** Represents brokerage, direct to fund and annuity assets under management as of 12/31/2023
