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Your Monthly Market Newsletter, February 2024

Your Monthly Market Newsletter, February 2024

| February 20, 2024

February has arrived. As we embark on the second month of 2024, all eyes continue to focus on inflation. The Federal Reserve’s first meeting of the year wrapped at the end of January, with the Fed deciding to hold interest rates steady. Though the Fed signaled it would not make any cuts until it is confident inflation is moving toward its 2% target inflation rate, Fed Chairman Jerome Powell indicated cuts to interest rates may be likely as early as this spring as long as inflation continues to cool.

What’s on the rise: the cost of auto insurance, which increased by 20.3% in December 2023, according to the Bureau of Labor Statistics. The likely culprit driving costs higher is an increase in repair costs. Partially to blame may be electric vehicles, which are rising in popularity yet more expensive to repair. Also, 30-year mortgage rates started creeping higher in January toward 7.0% after dipping to 6.6% in December. However, a recent report from Fannie Mae indicates the housing market may be less turbulent in 2024 compared to 2023 – good news for those planning to buy a new home or refinance their mortgage loan this year. 

If overspending is a bad habit you’d like to break, consider a recent trend taking social media by storm: loud budgeting. With loud budgeting, social media users make short videos or posts outlining what they are and aren’t willing to spend money on. The trend may have started as a joke, but it can actually be a good tool for managing your budget. The act of sharing goals out loud is a great way to hold the goal setter accountable. Talking about spending can help keep financial goals front of mind and alleviate the pressure of saying no to purchases outside a set budget. So, next time you’re planning your budget, consider sharing some of your plans with friends. It may help you keep your spending in check!

The IRS has started accepting 2023 income taxes, indicating tax season is here. If you haven’t started thinking about how you’ll file your taxes, now is the time to get serious about prepping. The April 15 deadline will be here before we know it! This year, the IRS will launch a free tool allowing eligible taxpayers to file their taxes directly with the IRS; however, this tool will likely not be widely available until mid-March. Taxpayers are encouraged to file their taxes sooner than later to help avoid tax identity theft and receive tax refunds quickly (if eligible to receive a refund). To ensure your filing goes as smoothly as possible, make sure you have all your essential documents handy, including last year’s tax return, your personal information, W-2 form, receipts for any expenses that qualify for deductions, records for your primary residence, and any personal business information.

In this month of love & romance, show your finances some love by reviewing your accounts and investments. By taking time to assess your financial situation, you can ensure it continues to align with your budget and goals and adjust as needed; just contact us to set up a review appointment. As always, if there’s anything we can assist you with, don’t hesitate to reach out. We’re always happy to help. Sending you warm wishes for a fantastic February!

Stocks

Although January ushered in a new year, the equity market showed strong similarities to 2023. Each major U.S. equity index finished up over 1% on the month, and the key drivers of the market were once again meg-cap technology names. The first trading week of the new year started slowly, as rates crept up and some investors took profits. As the month progressed, however, renewed confidence in (eventual) lower rates and continued strong economic growth drove a mid-month rally. On the month's final day, stocks fell as the Federal Reserve indicated rate cuts may not be seen until later this year.

Sector Performance

The start of the year saw five of eleven equity sectors climb higher. As interest rates increased, most interest rate-sensitive sectors were affected negatively, namely Real Estate, which was the January laggard. A continuation of mega-cap tech dominance saw the Technology and Communication Services sectors lead the way up. Sector performance also reflected earnings season, which ramped up in the back half of the month. Sectors like Materials and Consumer Discretionary, which both fell on the month, saw a drop in earnings from the companies that reported in January, contributing to the declines.

Bonds

Bonds had a difficult start to the year as interest rates rose, with the 10-year climbing 9.9 basis points, giving up some ground recovered in the last quarter. Continued strength from personal consumption and economic growth led investors to rethink the number and timing of potential rate cuts that the Federal Reserve would deliver. This information was confirmed on the final day of the month as the Federal Reserve concluded their meeting and held rates steady as expected but insinuated that rate cuts would not be coming until later in the year.

Economic Update

In addition to bolstering the higher-for-longer interest rate thesis, January gave additional impetus to the potential for a soft landing. Economic growth, as measured by Gross Domestic Product (GDP), was much more robust than anticipated in the fourth quarter at an initial reading of 3.3%. Jobs were added to the economy for the 36th straight month, with 216,000 added in December. The unemployment rate also remained at 3.7% in December. Broad inflation (measured by the Consumer Price Index) rose slightly, up to 3.4%, but core inflation, which excludes food and energy, fell to 3.9%, which is the first reading below 4% since May of 2021.

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Tiny Homes Ease Homelessness in Austin

Chronic homelessness has been an issue in Austin, Texas, for many years. To help ease this crisis, a neighborhood of tiny houses has popped up on the outskirts of Austin in recent years. Community First! Village currently houses 200 formerly homeless residents, and more homes are expected to be added in the coming years. Designed by architectural firms, these tiny homes focus on the best use of energy efficiency. In addition to the homes, this sprawling community also features shared facilities residents can use throughout the village, such as kitchens, gardens, recreational areas, and even beehives. These facilities employ many of the residents, providing them with stable job options only steps away from their homes.

Community First plans to grow to almost 2,000 homes across three locations in the coming years, making it the largest project of its kind in the nation to permanently house people experiencing homelessness. The project is big enough to house nearly half of Austin’s homeless population. The idea of using tiny homes as a solution to curb homelessness has been around for decades but has spiked in popularity in recent years. In 2019, 34 such projects nationwide grew to 124 projects today. 

For a more in-depth look at Community First and similar villages cropping up around the country, read here

THOUGHT FOR THE MONTH

Index Definitions

Dow Jones Industrial Average: The Dow Jones Industrial Average® (The Dow®), is a price-weighted measure of 30 U.S. blue-chip companies. The index covers all industries except transportation and utilities.

Dow Jones U.S. Real Estate Total Return Index: The index is designed to track the performance of real estate investment trusts (REIT) and other companies that invest directly or indirectly in real estate through development, management, or ownership, including property agencies.

NASDAQ Composite: The NASDAQ Composite is a market-cap weighted index of all issues listed on the Nasdaq stock exchange. It is heavily weighted towards the technology sector. 

S&P 500 Bond Index: The S&P 500® Bond Index is designed to be a corporate-bond counterpart to the S&P 500, which is widely regarded as the best single gauge of large-cap U.S. equities. Market value-weighted, the index seeks to measure the performance of U.S. corporate debt issued by constituents in the iconic S&P 500.

S&P 500 Consumer Discretionary: The S&P 500® Consumer Discretionary comprises those companies included in the S&P 500 that are classified as members of the GICS® consumer discretionary sector.

S&P 500 Consumer Staples: The S&P 500® Consumer Staples comprises those companies included in the S&P 500 that are classified as members of the GICS® consumer staples sector.

S&P 500 Energy: The S&P 500® Energy comprises those companies included in the S&P 500 that are classified as members of the GICS® energy sector.

S&P 500 Financials: The S&P 500® Financials comprises those companies included in the S&P 500 that are classified as members of the GICS® financials sector.

S&P 500 Index: The S&P 500® index is a market-cap weighted index of the largest 500 companies headquartered in the United States. The index covers approximately 80% of available market capitalization.

S&P 500 Utilities: The S&P 500® Utilities comprises those companies included in the S&P 500 that are classified as members of the GICS® utilities sector.

S&P U.S. Aggregate Bond Index: The S&P U.S. Aggregate Bond Index is designed to measure the performance of publicly issued U.S. dollar denominated investment-grade debt. The index is part of the S&P AggregateTM Bond Index family and includes U.S. treasuries, quasi-governments, corporates, taxable municipal bonds, foreign agency, supranational, federal agency, and non-U.S. debentures, covered bonds, and residential mortgage pass-throughs.

S&P U.S. Treasury Bond Index: The S&P U.S. Treasury Bond Index is a broad, comprehensive, market-value weighted index that seeks to measure the performance of the U.S. Treasury Bond market.

Disclosures 

PLEASE NOTE: When you link to any of the websites displayed within this email, you are leaving this email and assume total responsibility and risk for your use of the website you are linking to. We make no representation as to the completeness or accuracy of any information provided at these websites.

A portion of this material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG Suite, LLC, is not affiliated with the named representative, broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information and should not be considered a solicitation for the purchase or sale of any security.

Index performance does not reflect the deduction of any fees and expenses, and if deducted, performance would be reduced. Indexes are unmanaged and investors are not able to invest directly into any index. Past performance cannot guarantee future results. 

Investing involves risk, including the potential loss of principal. No investment strategy can guarantee a profit or protect again loss. In general, the bond market is volatile; bond prices rise when interest rates fall and vice versa. This effect is usually pronounced for longer-term securities. Any fixed-income security sold or redeemed prior to maturity may be subject to a substantial gain or loss. Vehicles that invest in lower-rated debt securities (commonly referred to as junk bonds or high-yield bonds) involve additional risks because of the lower credit quality of the securities in the portfolio. International investing involves special risks not present with U.S. investments due to factors such as increased volatility, currency fluctuation, and differences in auditing and other financial standards. These risks can be accentuated in emerging markets.

The statements provided herein are based solely on the opinions of the Osaic Research Team and are being provided for general information purposes only. Neither the information nor any opinion expressed constitutes an offer or a solicitation to buy or sell any securities or other financial instruments. Any opinions provided herein should not be relied upon for investment decisions and may differ from those of other departments or divisions of Osaic or its affiliates.

Certain information may be based on information received from sources the Osaic Research Team considers reliable; however, the accuracy and completeness of such information cannot be guaranteed. Certain statements contained herein may constitute “projections,” “forecasts” and other “forward-looking statements” which do not reflect actual results and are based primarily upon applying retroactively a hypothetical set of assumptions to certain historical financial information. Any opinions, projections, forecasts and forward-looking statements presented herein reflect the judgment of the Osaic Research Team only as of the date of this document and are subject to change without notice. Osaic has no obligation to provide updates or changes to these opinions, projections, forecasts and forward-looking statements. Osaic is not soliciting or recommending any action based on any information in this document.