Commentary

After five straight months of positive stock returns, October saw negative returns for equities and almost all other asset classes. Bonds had an especially tough month dragging their return to basically flat for the first ten months of 2024.

There were several data series released during the month, all pointing to a slowing but healthy economy. GDP for the 3rd quarter came in at a very solid + 2.8%, ADP reported private employers added 233,00 jobs, retail sales rose a respectable 1.7% year-over-year and consumer sentiment rose for the third consecutive month.

“Resilience was the name of the game for the economy in Q3, as the U.S. pushed through disruptions from a punishing hurricane season, port strikes and Middle East tensions,” writes Mike Reynolds, vice president of investment strategy at Glenmede.

This “Resilience” as Mr. Reynolds so aptly calls it, is responsible for the solid 3rd quarter earnings currently being reported. This has underpinned the double-digit gains in the equity markets thus far in 2024.

The bond market, however, is dealing with the lingering, or sticky, inflation situation. Bond yields have come down with inflation since peaking a year ago but started rising in early September. Interestingly, this has almost perfectly coincided with the Federal Reserve cutting short-term rates.

The rationale behind climbing rates is twofold, both based on the Presidential election. First, under either candidate the U.S. federal budget deficit is expected to grow materially. This would require the government to sell more bonds and pay higher rates to do so. Second, another Trump term would bring higher tariffs and thus higher prices to U.S. consumers…i.e. inflation.

Obviously, this is all speculation as no one knows what policies will actually be implemented. But this has not stopped the bond market from selling off.

November should be interesting…volatile…but interesting!

RISK NUMBERS

As of 11/04/2024

The Risk Number is at the heart of a sophisticated set of tools to precisely measure the appetite and capacity for risk that each client has and demonstrate their alignment with the portfolios built for them. The following graphic shows the risk of various asset classes as measured on a scale of 1-99 (1 being the most conservative and 99 being the most aggressive) as of the date above.

CENTRIC'S APPROACH

We start with a Risk Number, a measurable way to pinpoint how much risk you want, need, and already have. Then, your wealth advisor will optimally allocate our investments to help you reach your financial goals. Along the way, you will receive transparency of information, seamless proactive service and the trust and accountability you need to stay on track. All of this will lead to your personal comprehensive investment strategy that is powerful, disciplined, responsive.

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Sources:

Centric’s Market Assumption Disclosures: This information is not intended as a recommendation to invest in any particular asset class or strategy or product or as a promise of future performance. Note that these asset class assumptions are passive, and do not consider the impact of active management. All estimates in this document are in US dollar terms unless noted otherwise. Given the complex risk-reward trade-offs involved, we advise clients to rely on their own judgment as well as quantitative optimization approaches in setting strategic allocations to all the asset classes and strategies. References to future returns are not promises or even estimates of actual returns a client portfolio may achieve. Assumptions, opinions and estimates are provided for illustrative purposes only. They should not be relied upon as recommendations to buy or sell securities. Forecasts of financial market trends that are based on current market conditions constitute our judgment and are subject to change without notice. We believe the information provided here is reliable, but do not warrant its accuracy or completeness. If the reader chooses to rely on the information, it is at its own risk. This material has been prepared for information purposes only and is not intended to provide, and should not be relied on for, accounting, legal, or tax advice. The outputs of the assumptions are provided for illustration purposes only and are subject to significant limitations. “Expected” return estimates are subject to uncertainty and error. Expected returns for each asset class can be conditional on economic scenarios; in the event a particular scenario comes to pass, actual returns could be significantly higher or lower than forecasted. Because of the inherent limitations of all models, potential investors should not rely exclusively on the model when making an investment decision. The model cannot account for the impact that economic, market, and other factors may have on the implementation and ongoing management of an actual investment portfolio. Unlike actual portfolio outcomes, the model outcomes do not reflect actual trading, liquidity constraints, fees, expenses, taxes and other factors that could impact future returns. Asset allocation/diversification does not guarantee investment returns and does not eliminate the risk of loss.
Index Disclosures: Index returns are for illustrative purposes only and do not represent any actual fund performance. Index performance returns do not reflect any management fees, transaction costs or expenses. Indices are unmanaged and one cannot invest directly in an index.
Riskalyze Disclosure: The Risk Number® is a proprietary scaled index developed by Riskalyze to reflect risk for both advisors and their clients. The Risk Number is at the heart of a sophisticated set of tools to precisely measure the appetite and capacity for risk that each client has, and demonstrate their alignment with the portfolios built for them.
Shaped like a speed limit sign, the Risk Number gives advisors and investors a common language to use when setting expectations, recognizing risk and making portfolio selections. Just like driving faster increases hazards, a higher Risk Number equates with higher levels of risk.
General disclosure: This material is intended for information purposes only, and does not constitute investment advice, a recommendation or an offer or solicitation to purchase or sell any securities to any person in any jurisdiction in which an offer, solicitation, purchase or sale would be unlawful under the securities laws of such jurisdiction. Reliance upon information in this material is at the sole discretion of the reader. Investing involves risks.