Good morning. My name is Chad Taylor, managing partner with MDT Financial Advisors here in Houston, Texas. Today is Friday, June the seventh, 2024, and I wanted to get on and do a quick MDT Markets minute. Hope everyone's having a good start to the summer. I don't guess the summer has officially started yet, but here in Houston it kind of feels like the summer it's gotten so warm. And today, on Friday the office had a little impromptu, or really not impromptu, Beth Za here in the office. One of the client associates organized a French open morning brunch, so we had croissants and different tennis food because of the finals this weekend. So Beth is always good about doing that. She is a big tennis fan and last year I think we had a Wimbledon Friday morning event. Now we had a French open event and I think we're going to have another one for Wimbledon.

So it's always good to catch our breath a little bit here around the office because it's always so hectic. So it was really good. And there's probably going to be some pictures posted on different LinkedIn or something. So that was fun. Today I wanted to go over some of the things that have been going on in the markets. So if you remember through the end of March, it was pretty good. April was pretty rough in the stock and bond market. May we got back quite a bit of that here in June. It's kind of been up and down.

And today we also had the May employment numbers come out. And so earlier this week, the Wells Fargo Investment Institute, who I also heard them speak at a conference two weeks ago, which was kind of interesting, but they put out a report just this week. The title of it was Buckle Up for More Volatility. And I know we try to send that out, so you may have already seen it and read it, but I just wanted to go over a few things that I took from that report. So it's all right. Now. When you look at the market, the Dow Jones Industrial Average is not up that much this year. Last I looked, two to 3% maybe the s and p 500 was up close to 11%. Now that's the market cap weighted s and p 500 versus the equal weighted where you just take the 500 stocks and equally it's up four to 5% somewhere in that range so far this year.

And so you still have a little bit of the Magnificent seven kind of pushing the s and p 500 around because their market capitalization is so big that when they go up, just those seven stocks really have a big impact on the return of the market. On the market capitalized weight of the s and p 500. And so that's what happened at the end of last year. It's kind of still going on right now. It happens from time to time. I do remember back in the late nineties when you had that going on. And so it kind of skews what's been going on in the markets. And so if you've all heard the old saying, sell in May and go away, sell all your stocks in May and then come back again in the fall. Sometimes that works, sometimes it doesn't. But it always gets brought up every year about this time because the markets, it has happened in the past, but everything is still kind of revolving around inflation and interest rates.

And so when we talk about buckling up for more volatility, the main culprits are, well, the Fed lower interest rates. That's the question. If you remember at the beginning of the year there was prognosis that they would lower rates five to six times this year. I think that's come down now because inflation got a little sticky. The economy still seems to be holding up and employment numbers still seem to be holding up. And in fact, just today the main numbers came out at about 272,000, which was more than the consensus that was expected to come out about 190,000, so quite a bit more. So that probably leads to the Fed not feeling like they need to lower rates quite yet because inflation, I know I mentioned it in the last video, but inflation did come down a little bit the last time they released the numbers, which was good after two or three months of it being a little higher than what was anticipated.

But we have another fed meeting, June the 12th, and that meeting, we're not projecting that they're going to lower rates then, but you will have them starting to include their projections for what they think is going to happen the rest of the year. As far as lowering rates in March, the projection from them seemed to be about three more or three cuts this year. Now, I don't know what the right word is, but the thinking is that they're probably going to show a projection of one, maybe two. And at this point, Wells Fargo advisors still thinks we're going to have two cuts this year and maybe one next year. So we'll see if that still plays out. And what does that mean? Why is that such a big deal? If you remember, when rates are high, people tend to borrow less. So if they're borrowing less, the projection is that could slow the economy down, which we think it still will.

Hence the reason for at some point pulling the rates back down a little bit. But the Fed just, they have two main mandates, inflation and employment. And so employment still, as the numbers show today are holding up inflation still. It's not down to that target of 2%, although it is starting to come down a little bit more or it did this last one, but the Fed just doesn't want it to kind of go back up too. Go back up if they cut rates too quickly. So that's what's going on. On the interest rate front. We have the election coming up that will start to play a part when polls start coming out. We had the conviction last week of the Republican candidate. We have more polling surprises, possibly if the economy does weaken, that would tend to hurt the incumbent higher food prices, consumer sentiment coming down a little bit.

So there's all those things that could affect polling and when polling starts coming out, that could affect markets depending on the day, probably won't see that until later summer, early fall, but it is something to keep an eye on. So those are the two main culprits or reasons for the potential volatility over the summer. Who knows if it will? For sure. These are projections. It's been pretty volatile all year, and really the last two years have been, you always think you've seen everything and then you don't. And it's always something new. So if you have questions about that, kind of let us know, and it's always good to have conversations about that. Another little thing that we put out, kind of a thinking concept that if you would like a copy of it, let me know, but it's kind of titled, preparing for Tomorrow. Today As the summer goes on, maybe you're going to spend some more time with family.

It gets you to thinking of what happens if unfortunately one person or you pass away, make sure you have all your ducks in a row, think through all that stuff, talk about it with your family so that it's already going to be an emotional time for who's still here. But if you prepare and plan, it makes it a little easier. So if you would like a copy of that little thinking concept, let me know. It is really kind of simple, but it does bring up conversation, which I always think is good when it comes to making sure your estate is prepared. So that was what I had for today. If you have any questions, please let us know. I hope you have a great couple of weeks. Thank you.


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