March 2024 Newsletter

Dear Clients and Friends,

February just notched the best returns for the S&P 500 and Nasdaq since 2015, while the Dow had its best February since 2021. Thus far in 2024 there has been more market breadth with more than 71% of the stocks included in the S&P posting positive returns. That said, the median return of these is 3.3% which is well below the benchmark index’s total return.

This is because, yet again, a handful of mega-cap tech stocks accounted for much of the strong performance; Nvidia (up 30% this month), Meta (up 26%) and Amazon (up 13%) added almost $1 trillion in market capitalization in February alone which has been a big reason our stock portfolios continue to push higher. Alongside owning them outright, many of our ETFs are weighted heavily in these names (XLK, ITOT) but we also maintain holdings that are more defensive in nature and should provide uncorrelated price action if the Magnificent 7 come back to earth.

Bonds also continue to be a source of optimism as we push closer and closer to a rate cutting environment. Pretty much everyone expects the Fed to cut rates this year, but expectations have changed.  A month ago, the futures market was pricing in five or six twenty-five basis point (bps) rate cuts in 2024 (125 – 150 bps in total); now the market is pricing in three or four (75 – 100 bps total).  Two relatively strong employment reports and an upside surprise with Q4 GDP data caused some rethinking, but this could be reversed just as easily. So while the inflation problem is proving to be bumpy (but not off-trend at this point) it does not give us a reason to change our outlook on the bond market as a whole. 

Finally, as we get closer to tax filing deadline we wanted to send a few reminders and mention some changes that occurred in 2024.

You have until April 15th to make IRA contributions for tax year 2023. There was an increase from $6,500 to $7,000 for people under age 50 with catch-up contributions of $1,000 allowed for 50+. The phase-out income amount was also raised for direct Roth IRA contributions, and the backdoor roth contribution is also still an option (detailed in the image above). A backdoor roth contribution is where you make a non-deductible contribution to your traditional IRA and then convert those dollars to the roth IRA. This makes sense typically if you don’t have much in the way of pre-tax contributions in your Traditional IRA as the conversion does tax a portion on a pro-rata basis (which is why the IRS continues to allow this).

This is all part of the planning discussions and strategies in place for most of you but wanted to send this reminder as you have meetings with your tax planning teams in the coming weeks. 

We hope this information is helpful and we stand ready to help with any tax, investment, or planning strategy discussions. 

All the best,

Stephen, Dan, and Chris

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