Imagine being in an airplane and one of the engines catches fire. The captain announces over the intercom that “Ladies and gentlemen, this is your captain speaking. Our left engine has caught fir, but there is no reason for concern; we will still be able to land safely”. Let’s be honest, even with the announcement by the captain, we would still be greatly concerned. This is exactly how Kevin and I feel about the current health of the markets and economy.
Throughout the investment industry, we are continuing to hear that we are currently in a strong bullish market. We believe this may be short-sighted analysis. Obviously, we cannot entirely predict the future, and these similarities do not predict or confirm any future outcome. That being said “History does not repeat itself, but it often “rhymes”. Let’s look at some similarities between 2007 and 2024.
Rate Changes
- 2007: After raising rates to 5.25%, the FOMC initiated its first rate cut of the cycle on September 18, 2007, when they cut rates by 50 bps.
- 2024: After raising rates to 5.50%, the FOMC initiated its first rate cut of the cycle on September 18, 2024, when they cut rates by 50 bps.
New Highs
- 2007: On October 9, 2007, the S&P 500 set a new all-time high with a close of 1,565.15.
- 2024: On October 18, 2024, the S&P 500 set a new all-time high with a close of 5,864.68.
Recession?
- 2007: A recession began in December 2007, ultimately ending in June 2009. Recession?
- 2024: Only time will tell.
Bottom Line: For the time being, we are continuing to participate in the markets as well as staying invested in risk-off investments, however we are still concerned with the overall health of the markets. The result of the 2024 elections might change our investment strategy, but regardless of election results, we still hold the belief that a recession is coming. If you have any questions or concerns about our investment strategy, please feel free to give us a call. We would be happy to elaborate further.
Bibliography
Colquitt, J. (2024, October 21). Weekly Chart Review. History doesn’t repeat itself, but it often rhymes…, p. 1
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Economic forecasts set forth may not develop as predicted and there can be no guarantee that strategies promoted will be successful. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.