May 2024 Newsletter

Dear Clients and Friends,

Spring is in full swing here in Colorado Springs. We hope you all are looking forward to summer and the warmer months ahead. 

Since last months update, the stock market has experienced a pullback and bond prices continue to push lower with medium and long-term interest rates moving higher. As of this writing here is where those two markets stand:


S&P 500: 5%

Nasdaq: 4.5%

Russell 2000: -1%


Aggregate Bond Index: -4%

Short Term Index: -1%

Long Term Treasuries: -10%

With the most recent underwhelming GDP and inflation data it was all but guaranteed the Federal Reserve would hold interest rates steady at yesterday’s meeting. However, there was growing sentiment on Wall Street, indicated by traders in the Fed Funds Futures market, that they might actually raise rates yesterday. The stock markets had been trading down somewhat and interest rates had been pushing higher as this probability rose.

And while Fed Chair Jerome Powell spoke tough on inflation, he left little doubt during his press conference about their most likely next move. His exact words were, “it is unlikely the next policy move will be a hike.” 

In response, stocks initially rallied and yields fell as Powell took the market’s biggest fear largely off the table. 

With this dynamic in mind, we continue to see value in many different areas and depending on where things go we have different strategies to deploy.

Allocation Changes

At the end of March our investment committee made some allocation changes in the international stock piece of our models. We had increased double digits in our Japan and Europe specific ETFs as well as our developed country ETF, and with growing geo-political risk, we decided to take those gains and redeploy the proceeds into an international stock fund that screens for “high-quality” companies only.

To be eligible for inclusion in this fund, companies must:
-have at least $500 million in cash or short-term investments.
-have a long-term debt to market cap ratio less than 30%.
-have a return on equity greater than 15%.
-not currently be in bankruptcy proceedings.
-not have entered into a definitive agreement/arrangement that would likely result in the security no longer being eligible

So in short, we made a move to become more defensive with this portion of the portfolio. 

We will also continue to add structured income notes to your portfolios that have been yielding 10-14% and as volatility picks up in the stock market, we should see yields at the higher end of this range. 

The bond portion of our models will continue to yield between 4-8% but we won’t see a meaningful impact to performance here until rates eventually come down. Time will only tell when this occurs, but it’s unlikely to happen until inflation readings come down which will primarily be driven by energy prices.

Previous data suggests maintaining our overweight in high-quality investment-grade bonds while the yield curve remains inverted. This historically has produced the lowest risk/highest reward during yield curve inversions. 

We believe our allocations make the most sense in this current environment and will continue to monitor these dynamics closely. We thank you for your continued confidence and trust and look forward to answering any questions you might have.

Stephen, Dan, and Chris

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