Market Forecast: Buckle Up!

Readers are urged to regard “early in the year” stock market and economic forecasts as a form of entertainment. No one really knows what markets will do. Forecasts are educated opinions at best.

Last year the inflation rate was accelerating, and the Federal Reserve Bank aggressively raised interest rates. Many economists predicted a significant slowdown, a bear market, even a potential recession in the second half of the year. Many investors fled Wall Street in favor of rising yields in FDIC guaranteed savings vehicles, as the bond market struggled with rising interest rates. When interest rates rise, bond values decline.  

But the bear went into hibernation.  A bull appeared and the market surprised to the upside. On December 30, 2023, the Dow Jones Industrial Average closed just shy of its all-time record high of 37710.10 set two days prior on December 28, 2023. The S&P 500 Index closed a shade below its all-time high set on 01.03.22. The Nasdaq Composite Index closed about 1000 points below its record high. Major indexes have waffled during the initial trading days of 2024 as some headlines warn investors to “buckle up for a potential bumpy 2024.”

“Buckle up” is good advice whether driving, riding as a passenger in a vehicle, or when flying. As a frequent flyer I often see little ones on an airplane bouncing around unbuckled because they can’t sit still. After this writer left the U.S. Air Force, I worked for a major airline for a number of years, initially in a two-year management training program. On two occasions I experienced a pilot training exercise in dealing with a simulated “explosive decompression” in the passenger cabin, such as occurred on January 5, 2024, on an Alaska Airlines plane at 16,000 feet when a faulty door plug blew out. Airplanes often fly at altitudes above 35,000 feet in very thin air. While securely bucked up, a planned deep dive decline from over 36,000 feet to below 10,000 feet in mere minutes in a Boeing 727 jet was an amazing experience! Thankfully, decompressions are extremely rare, but pilots are trained to deal with such emergencies and others.

On the Alaska flight the row where the door plug blew out was not occupied, fortunately. If an unbuckled child had been sitting looking out of the window when a massive hole emerged with explosive force, most likely the infant would have been sucked out into the night sky blackness over three miles in the air. The mere thought of that is horrifying. Yet flying is one of the safer forms of travel. There were no fatal aircraft accidents in 2023 involving international flights or passenger jets. Over 19,000 people died in U.S. traffic accidents in 2023, yet we think nothing of driving virtually every day. Traffic fatalities are down compared to prior years because more people are buckling up. Nevertheless, per the National Highway Safety Traffic Administration, about 37 people a day in the U.S. die in drunk-driving crashes, about one person every 39 minutes. That’s why seat belts and car seats for kiddies are recommended. You may not be drinking, but other drivers may.

Because stock market averages are subject to unexpected market turbulence, to the downside as well as the upside, “financial seatbelts” are recommended. There are certain things that should be in place as one embarks on a long-term investment program. A written comprehensive life-centered financial plan should guide all financial strategies. A person or couple ideally should have at least six months to a year’s worth of living expenses in a guaranteed or otherwise conservative liquid money market account before embarking on a long-range market centered asset accumulation program. However, from day one enroll in the matching program of an employer’s retirement plan if available so as not to forfeit “free money.” A comprehensive legally-documented living and testamentary estate planning program should deal with the ever present risk of injury, illness, disability, and death.

Investing in the stock market is a long-term strategy. The best time to invest is when you have the money! “Market timing” really doesn’t work. You will never catch markets at the bottom. But if you buy when stocks appear to be on sale, over the long run you’re likely to look like a genius. With stocks it’s about “time,” not timing. 

Alternative investments, often subject to net worth restrictions, can provide diversification to a portfolio in addition to stocks, bonds, and money market instruments. Do not “bet the house” on any one investment. Diversification counts. One goal of investors as they pass age 50 or so on the way to whatever retirement will be is to build an income and dividend generating portfolio, along with the potential for growth over time.

Even during market dips, when you don’t want to sell stocks if you can avoid it, it’s a good idea to have cash reserves to see you through along with good dividend flows. If you live long enough, you want to have financial peace of mind and a sense of purpose to sustain you, along with faith in God and His eternal promises of salvation as the ultimate reward no matter how crazy the world around you seems or becomes. Scary headlines, sadly, are not rare.

Inflation is still running at 3.5% annualized, and between inflation and taxation your net buying power is under attack. There’s a major leak in your financial bathtub. A solid tax planning strategy is very important, working with your financial advisor and your tax advisor.

Here’s wishing you and yours a happy and blessed 2024!