3 essential truths for 2024’s second act

Turn down the volume and stick to your plan.

Article published: June 05, 2024


In this article:

  • The upcoming election season and economic news could cause some jitters.
  • Media headlines may or may not relate to your personal financial circumstances.
  • Staying invested is likely the best course of action, no matter how loud it gets. 


It’s never really “quiet” when you’re talking about the markets and economy, but the rest of this year has the potential to be louder than average. Keeping your equilibrium might get challenging. Remember these three things if you start feeling the need to make a change to your financial plan.



Political rhetoric is just that

Political promises will be flying left and right as candidates fight for votes. But talk is free, and there are a lot of hurdles on the journey from campaign promise to actual policy.

Just like you wouldn’t build a house on sand, you don’t want to make plans based on speculation.

The looming election may also cause additional market volatility – that’s simply the usual reaction to uncertainty. We expect those jitters to settle down once the election is over. Rest assured that one political party doesn’t have a monopoly on good market outcomes. After all, money is green, not red or blue.



The economy and the stock market are different things

Economic news, including interest rate changes and inflation numbers, will continue to be a big attention-getter for the rest of 2024. At this point, we have no idea whether the news will be good or bad. But don’t make the mistake of equating the health of the economy with the health of your portfolio. While they’re related, they don’t move in lockstep.

Economic indicators reflect what’s currently happening. (Actually, they’re somewhat backward-looking because the period they’re reporting on is already over.) They tell us what it costs to borrow, how many people have jobs, and how prices are changing right now.

Markets measure how much investors are willing to pay for the future promise of stock and bond returns. And as such, they’re forward-looking; they reflect the industry’s predictions about what might happen – is there trouble on the horizon or a strong, healthy economy? (Remember, sometimes these predictions are right, and sometimes they’re not.)

They both move in cycles, but those cycles don’t usually coincide

The stock market, of course, rises and falls through bull and bear markets. And the economy goes through high growth and slow growth or recessionary periods.

There is a relationship between market and economic cycles, but they’re frequently not concurrent – Russell Investments found that, on average, the market hits a high (and begins declining) five months before a recession begins, and research from investment firm Schroders showed that the market then bottoms out an average of five months before a recession ends.

Market expectations drive this relationship. As economic growth starts to slow, investors begin to predict an economic downturn and sell stocks. A dip in the economy typically means lower corporate earnings, so stock price declines happen in anticipation of those future lower earnings. By the time economists confirm a recession, the markets have already reacted. On the other hand, investors often begin buying stocks again as soon as they see a recovery ahead, driving the market back up before the recession is over.

But that’s just the general, high-level pattern. To illustrate the variety of ways the markets and the economy can intersect, here are a few recent examples:

S&P 500 Index, September 1988-August 1992

In the early 90s, stocks began falling shortly before a slowdown began and hit a bottom early on, more than recovering losses before the recession ended.

S&P 500 Index, October 1997-December 2004

When the dot-com bubble burst, stocks turned down well before a recession was declared and kept going down for quite a while after it ended.

S&P 500 Index, January 2005-December 2013

As the global financial crisis began, stocks turned negative at nearly the same time the recession began, then began recovering shortly before it ended.


Source: S&P Dow Jones Indices, Bloomberg. Indexes are unmanaged portfolios and investors cannot invest directly in an index. Past performance is not a guarantee of future results.

What does this mean for you? Let’s reiterate that we don’t know what will happen with the markets or the economy in the second half of the year – both may very well continue to grow. But trying to time investment decisions based on what’s happening in the economy is usually a losing strategy, both because the ways they interact can vary and because what’s happening in the economy is already priced in by the time economic reports are released.

Interest rates impact both the economy and the markets

The ability to reduce borrowing costs is an important lever the Federal Reserve can use to boost the economy when needed. As markets anticipate the eventual flow-through to higher earnings, a rate cut (or just the potential for one) can send them higher, as we’ve seen.

And for the first time in a while, the Fed has lots of room to cut. That’s good news for your long-term portfolio. In the meantime, the market’s prognosticating about rate cuts can mean increased volatility.



The macro economy is not your personal economy

Economic reports are just data, but they do have a real, human impact. A bad unemployment report is one thing; losing your job is another.

As we said at the beginning of the year, should we see negative headline news, remember that it doesn’t necessarily tell you anything about your own financial situation. Inflation that’s driven by gas prices and housing costs might not affect you much if you’re retired and own your home. Interest rate increases won’t hurt you if you don’t have any debt. Job losses don’t change your financial health unless you’re the one affected.

Of course, if you’re personally feeling an impact from something happening in the economy, that’s when we’ll decide together whether to change your plan or strategies.


As always, we’re by your side

2024’s noise may fade away without any real impact. Volatility is accounted for in your financial plan, and most likely, the best reaction is to turn down the volume and stay invested.

But your planner is here to support you whenever you face financial challenges by giving you the guidance that’s right for your situation. Don’t hesitate to reach out when you need us.



Certain information throughout this document, including historical performance information of various indexes and benchmarks, has been obtained from independent sources that we believe to be reliable, but we do not warrant or guarantee the accuracy of this information. Past performance does not guarantee future results.

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