Retirement Planning Advice and Financial Related Education by Barry Unterbrink, Chartered Retirement Planning Counselor

Monday, March 17, 2025

2024 Markets Recap and Review

Dear Clients and Friends,

Here's my 2024 Year-End Financial Markets Review. I'm rather late posting this, as I traveled to China for 6 weeks and returned in early March. Reach out to me at Unterbrink@usa.net with any questions and comments, please.

The financial markets in 2024 returned nice gains for most investors. Stocks logged their second double digit gain of +13% for the Dow Jones and +23% for the S&P 500 index. The technology-laden NASDAQ increased even more at +29%. You have to look back to the late 90’s euphoric years of 1997-1998 to find the last back-to-back gains like these. History shows that the average gain for the S&P 500 following consecutive +20% gains is +6.7%, so that would still be positive, but lower and perhaps expected given the stellar performance.

The talk of the new technology called Artificial Intelligence, or AI, was the chief driving catalyst behind the outsized gains across other sectors also.  Microsoft and Meta Platforms (Facebook) are building data centers that will require massive power usage, so Electric Utility’s will benefit, along with natural gas pipelines, energy plays. Utilities gained +23% last year, Consumer Discretionary, (think Nike, Home Depot, McDonald’s) rose +24%, and Financial sector stocks (banks, American Express, MasterCard), up a nice +30%.

A few sectors of the stock market did not participate. Health Care stocks only could muster a 3% gain on average, and Materials stocks, (think Dupont, International Paper, US Steel) were about break-even!

Some don’t buy into this AI story-line, and suggest that it’s time to play defense in 2025, hedging your bets and taking some chips off the table so to speak. We’re in that camp somewhat, and have used cash and especially GOLD to offset – and add to – the stock market gains the past couple years. Also, we’ve added value-oriented stocks and ETF’s in place of growth names to – hopefully – lessen the impact of a downturn in stock prices.

The Bond market experienced a volatile year, as interest rates were on hold and not raised by the Federal Reserve (last hike was July, 2023). When they finally did cut rates last September, the bond market responded with HIGHER market rates, as if the bond investors didn’t believe the reason for the cut. The November and December rate cuts by the Fed totaling 0.75% also did little to change the course of interest rates that investors and consumers use. Interest rates went UP after the first and second rate cuts. Of public interest, the 30-year mortgage interest rate to borrow increase from 6.1% to 6.8% in the three months following the September 18th cut. That’s not helping folks buy a home, is it? Here in mid-March, borrowing rates are still “sticky”, with the 10-year Treasury Note at 4.3% and the 30-year mortgage rate at 6.6%. Analysts say that a rate below 6% will spur a big rise in home-buying. We’ll see, if and when that occurs. Investors and savers can still get a positive return in the bond market, as inflation is running at 3% year-over-year and bonds yield above that.

The third leg of our investment stool is Gold. The precious metal has performed nothing short of spectacular the past few years. Gold prices rose $560/ounce last year, for a 27% gain. In 2023 they were up $250. The real breakout in price was after the Hamas invasion of Israel near $1,860. The Russian invasion of Ukraine in early 2022 set up that rally somewhat also I feel, as wars tend to create a favorable environment for Gold. The U.S. Inflation was raging also; year-over-year inflation was running at +7.8% at the time of both events. Central Governments were big buyers of Gold – and still are today – as a store of value, while Gold jewelry demand was up 9% last year, according to the World Gold Council. Gold miners can only find about 1%-2% more Gold each year; it’s that hard to mine. Lastly, all the above ground Gold in the world measures about 25 cubic yards! Talk about the scarcity and alure of the yellow metal. As I write this, Gold’s trading at $3,001 an ounce, an increase of $375 this year.

Since it's so late in the 1st quarter that ends in two weeks, I will post again sometime in April with a review of the markets and my positioning for the next few months.

Profitably Yours,

~Barry

 

 

 

 

 

 

 


 

Tuesday, December 31, 2024

Year End Review - Dead Reckoning Results

 

I’m wishing all my clients and friends a Happy and Prosperous New Year 2025.

With just one day left in 2024, The stock market looks like it will end this year with another double-digit gain; up about 25% on the S&P 500 Index and up 13% or so on the Dow Jones Industrial average. Looking at the major Sectors of the stock market that I normally report on for a good representation of performance, here is the tally through Dec. 27th.

The Sectors out-performing the S&P 500 Index: Telecom Services, +35%, Technology, +32%, Financial stocks, +31%, Consumer Discretionary, +27%. Sectors showing gains but under-performing the S&P 500: Utilities, +23%, Industrial Stocks, +18%, Consumer Staples, +14%, Energy and Real Estate, +5% each. The bottom dwellers are Health Care, +4%, and Materials, +1.3%. Tossing in our two commodity-based investments of Gold and Silver, they logged in at +26% and +21% respectively.

The other two classes of assets that are most often used in portfolio construction, Bonds and Cash – certainly under-performed stocks. Bonds are barely were break-even in the 2021-2022 period; a slight gain in '23 and about even this year. We advocated to shun Corporate and Government bonds the past two years in favor of short term Treasury bills – maturing in one year or less -  as they are very stable in price and yields were between 4.5% to 5.6% the past two years. That was essentially risk-free interest paid by the U.S. Treasury! Three-month T-bills today are paying 4.25%, Six months at 4.17%.(rate chart below) 


I use a portfolio management system that was formulated by my father Larry back in 2018. He labeled it the Dead-Reckoning (DR) portfolio system. His business partner used Dead Reckoning in his Navy duties way back when to calculate future positions and movement of ships at sea. I try to anticipate movements in stocks based on the past price and technical data.

Each month I use this to select investments, type and quantity – and then allocate money to stocks, bonds, precious metals, and Cash. The general premise of DR is that strong sectors tend to continue to move up in price over time; they don’t wiggle around month to month. Once a trend develops, it often moves in that direction for awhile.

Also, when investments move to new highs; think Apple or the price of Gold, there’s a ‘pile on’ effect for those who don’t own it. Then there are no owners at a loss, so there is little reason to sell. Example: Once Gold prices moved above their prior high near $2,050 after the October 2023 Hamas Invasion of Israel, it rallied $700/ounce to new highs last month of $2,775.

Does this always work? Of course not. You can get tricked when investments or sectors move rapidly. Energy and Technology did this to me in the recent past. We’re spread out across 7-8 areas, so no one area will hurt the performance too much. Generally, the portfolio owns 2-3 Market Sectors (of 10) using low expense exchange-traded funds, always a 10% or more holding in Gold, the balance in short term cash or T-bills or money funds earning 4% plus.

I select new buys and sells that get replaced every month; but often hold the same ones for multiple months until they fall off the ranking system.

Here's the record: 1/1/2018 – 11/30/2024

Dead Reckoning Portfolio Management
(Compound Annual Growth Rate):            +7.71%
$100,000 grows to $167,185

S&P 500 Index
$100,000 grows to $221,693                    +12.20%

My DR system under-performed the overall market. Is that relatively good?

You could have just sat in the S&P 500 index almost 7 years and made more money; all stocks, no bonds, no cash or Gold. BUT…you lived through the 2020 COVID bear market, when the S&P 500 fell 20% in 3 months. Then came the 2022 Bear Market, when the S&P lost 19.2% in value that year. Could you have navigated those down-turns, or had the gumption to hold on? That’s two tough calls to make; when to sell and then when to buy. I’ve seen some very poor decision-making in Bear Markets that take years to recover from.

For the DR portfolio, it FELL 7% during the worst COVID period (1st quarter, 2020), and it also FELL 7.5% during the 2022 (full year) bear market. We call those stats draw-down, or the maximum loss of value from point A to point B. The 2024 performance thus far is noted in the footnote below.

Sure, a lot more goes into portfolio construction and management than just percentages up and down. Your age, your risk tollerance, tax strategy - if it's not retirement account money. I would be fairly accurate to say that all investors would be better served by a diversified portfolio as their main holding, filling in the rest of the space with other investments in real estate, Crypto, annuities, cash value life insurance to name a few.

I hope you found this helpful, and share with your friends please.

Reach out if you have any questions or comments.
And again, be safe out there, wishing you a prosperous 2025!

~Barry

 

2024 Performance thru 11/30/24. (DR)                  +17 %
2024 Performance thru 11/30/24. SP500                +28 %

* all performance stats noted do not include dividends or interest payments; the
dividends/interest of the DR portfolio system and the S&P 500 would be fairly comparable across all portfolio construction time periods.


  

 

Monday, September 30, 2024

Roaring Stock and Gold Markets; What's Ahead?

With just one day remaining in the 3rd quarter of this year, the financial markets are performing quite well. Stocks and Gold are near new all-time highs, while Bond prices are getting a jolt from the Federal Reserve’s first cut in interest rates since 2020.

Let’s recap the month, quarter and year-to-date.

September’s are normally weak in stock market history, yet this month stock prices are up 1-2 percent. Treasury Notes and Bonds are ahead 1% to 1.4%, and precious metals are ‘on fire’ with Gold and Silver shooting up 6% and 9% respectively during September.

But one month does not fully tell the stellar performance this year, which is a better comparison over the nine months.

The Summers of 2022 and 2023 saw stock market declines leading into those Octobers; falls of 15% - 18%, before the big rallies in the fourth quarter each year. You had to stay invested or be really nimble to bag those gains.

This year saw a 9-10% short decline ending in early August, but essentially stocks gained in the three quarterly periods. So did Gold, to a larger extent. Here is a table of where we stand as of today.


I’ve included the S&P 500 Index (SPY) and the Nasdaq Composite Index (ONEQ) as benchmarks to show what out-performed: namely Gold, Silver, Utility and Communication stocks. Technology stocks round out the short list of the best performing sectors to own this year.

What lagged year-to-date were energy stocks, as oil prices peaked in early April. Still, a positive +6% gain for the sector. Health Care, +12%; Consumer Discretionary, +13%, Industrial’s +18%, and Financial (bank) stocks, up +20%. As you can see, even the lagging sectors gave you nice gains so far this year.

With this market being driven to a large extent by the prospect of a soft landing for the US economy – and now the first interest rate cut – this market may have more room to run higher. But before you go all-in with your lunch money, consider that the stock market (S&P 500), after a dismal 2022 - losing about 20% - is ahead a whopping +50% since New Year’s 2023. Tech stocks are +85%, Financials, +33%, Gold +44%. That’s a lot of moolah in just the past 21 months.

The historical +10% a year average gain for stocks is accurate for longer stretches, but shorten that up and the ups and downs can be dramatic year to year, even decade to decade.

Looking out over 10-year periods since 1926, stocks have not gained anything in 4 periods since the Great Depression, 95 years ago! Two of those were in the 1930's and two were this century. The 2000-2009 stretch is the most recent shown here*.

Compound Average Growth Rate (CAGR), interest and dividends included: 2000-2009

Stocks, S&P 500 Index:  -0.95%
Bonds: Corporate, Gov't. +6% to +7%
Gold, +14%
T-bills, cash: +2.8%

These numbers should jump off the page at you. Inflation averaged 2.6% during that time, so only Gold and Bonds kept you ahead of inflation. We'll call Treasury bills at +2.8% a wash. The nasty 2000-2002 bear market was followed by the Great Recession of 2008 pummelling stocks those years!

Gold prices nearly quadrupled in 10 years; $290 to $1,088 per ounce. Corporate and Government Bonds did the heavy lifting also, rising double digits in 3 of the 10 years.

I looked at the five-year rolling decade periods also and found that 12 periods were negative (out of 95). So that's a 1 in 8 chance of not making money in stocks in a 5 year period. If you are nearing retirement, say in 5-10 years, take heed of this information, and have an action plan.

Advice: Stay diversified to avoid any one investment class causing you big portfolio losses. Use Sell-Stops to protect your gains. The election / political results could affect the market’s direction in November and December.

 I'll post again after the election, and include my performance over the past 7 years using a diversified model-portfolio strategy. Contact me should you have questions or comments. I'm here to help.

Be safe out there!

~Barry


   * while still positive 10-year results, the 2001-2010 and 2002-2011 periods experienced sub-par stock returns of +1.4% and +2.9% respectfully. It was not until 2003-2012 until the rolling 10-year returns were positive and above +7%, and outpaced inflation every 10-year period thereafter.