Hello, my name is Chad Taylor, managing partner with MDT Financial Advisors here in Houston, Texas. Today is Tuesday, February the 20th, 2024, and we're one day after the President's Day. The markets were closed yesterday, and so today's the first trading day of the week. I hope you had a good holiday and a good long weekend. And I had a few things to go over today and also for those of you that kind of know our daughter Madison is dancing with the Cincinnati Ballet and end of this week I'm going to get to go up and see her dance in the Don Otte Ballet. So I'm real excited about that. And Jennifer, my wife is already there. They started last week or this past week weekend, so she's got to see a few shows already. She's a day or two ahead of me, but I get to go up and see that, which I'm excited about.

So last week, as far as the markets go, it was kind of a mixed bag. We had a pretty rough day during the week. Ended up getting a little bit better as the week went on. So what kind of started it was the January Consumer Price Index or CPI came out early in the week and inflation was a little bit higher than what they anticipated it would be, which made the markets sell off that day when it happened. Why did it sell off? Because inflation and it was only slightly, it wasn't like it was a lot, but it was just slightly better because it takes the Fed. The Federal Reserve has talked about raising rates, lowering rates, leaving rates the same. And there was some thought that they may could lower rates in March. Well, with this higher inflation number that was still over 3%, it takes the March cut probably off the table.

No one knows for sure, but makes it less likely. And then it brings into question than May if they're going to cut rates in May. If you remember, the Fed's main goal is keeping inflation close to their goal of 2% and then good employment numbers, and those are their two main focuses. Right now, the employment numbers are still fine, the inflation number was a little higher, which makes it less likely that we're going to see a rate cut in March, still, maybe in May, which obviously rate cuts, lower interest rates, which allow more people to borrow at lower rates, which makes the economy move forward. Later in the week, the markets went up because there was some consumer data saying that the consumer was starting to get a little less optimistic. So then the markets ran up, which there again, kind of good news is bad news or bad news is good news that the old saying goes because that led it to believe, well, maybe if the consumer stops spending quite as much, maybe the Fed will go ahead and lower rates. So right now everything's just data dependent and they keep saying that they being the Fed keeps saying that, and that's more than likely what's what we're going to be dealing with for a while as far as this markets go.

Okay, great. Another area that I wanted to go over today was kind of the narrowness of the markets last year and here at the beginning of this year. And I took this chart from our friends at the Wells Fargo Investment Institute, and I found it interesting, and I thought you might as well. We talked about, I know we've talked about it a few times, you've heard it on tv, the magnificent seven stocks that made up a big chunk of the return last year. Seven stocks of the s and p 500, 500 stocks pushed the markets up in some cases to pushed it up for the year. And if you remember that the s and p 500 that you hear about on TV is more of a market weighted index. And so if a company is worth a lot more, it contributes more to the index up and down.

And so a company like Apple that's huge contributes more than a smaller company in the s and p 500. And so that's why it can skew just a few stocks. The index versus an equal weighting where you have each stock is equally weighted throughout the index. So if you look here to your left, this is a chart that talks about equal weighted versus market weighted indexes. So the brown line here is the market weighted. That's what you see on tv. The equal weighted is the dots that it is not quoted as much, but it's more diversified as far as just each company has the same chance to help the index or hurt the index. And last year you see that they were kind of following along the lines the same until you got into March, and then the market weighted because of those seven stocks really pushed higher versus kind of the equal weighting.

But what's interesting is, so we've all experienced it in the last year and you kind of start to think that's always going to be the case. And then I have to remind myself I am just like everybody else as far as I see the same things that you see, but you look here on the right hand side, the same chart just spread out to 2009. So from 2009 through the end of 2023 or through February 12th, 2024, you see the same market weighted brown versus equal weighted dot, and you see that they both kind of trend along the same lines. In this case, for the most part, the equal weighted did slightly better than the market weighted over time. Doesn't necessarily mean it will going forward. No one knows for sure, but it does kind of give you some pause to say it. Diversification still does work. Spreading out your assets for risk and for reward usually works out just fine. Last year was just kind of a different year where just seven companies made up a big chunk of the gain. So I hope you find that interesting. If you have questions about this, please let me know. Or if you have questions about anything else, please let me know. I hope you have a great rest of the week and a good start to the spring when it does start. Thank you.

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