Wade Financial Advisory

quarterly market review

2024 1st Quarter Investment Review and Portfolio Changes

2024 1st Quarter Investment Review and Portfolio Changes

In our quarterly investment update, we’d like to:

  • Summarize market activity over the 1st quarter of 2024
  • Review the impact of elections on markets
  • Share information on March dividends in Schwab accounts
  • Provide various market returns information

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2023 Investment Markets In Review

Markets and Investments Summary

Global equity markets increased sharply in 2023, with 22% growth, led by a 26% return on the S&P 500.  These returns reflect optimism by market participants that moderating inflation in the US may lead the Federal Reserve to reduce short-term interest rates from their current ~5% level, which reflects a multi-year high.  This optimism on interest rate policy reflects a reversal of the concern over inflation and rising short-term interest rates that drove sharp declines in stock prices in 2022, as the potential for higher interest rates to stifle the economy drove investors to be more cautious.

The favorable stock market returns in 2023 reflect a rebound from substantially negative returns from the prior year, with 2022 resulting in a ~18% decline for the global stock market.

As investors anticipated a lower path of future interest rates, this information was also reflected in bond prices.  Lower interest rates drive bond prices higher, and in 2023 the US Aggregate Bond Index delivered a ~5.5% return.  Much of the increase in bond prices materialized in the fourth quarter, as evidence of moderating inflation arrived.  The positive returns for 2023 in bonds also follow a negative return for 2022, as Federal Reserve rate increases and high inflation resulting in an aversion to bonds, which delivered a -13% return in 2022.

The alternative investments primarily used by WFA performed relatively well in 2023, and investments that do not have a strong link to stock market returns performed the best, driven by independent sources of return.

Notably, reinsurance investments delivered an ~19% return, as demand for reinsurance coverage grew strongly, while the supply of reinsurance was constrained by reinsurer’s discipline in limiting the amount of coverage issued.

After several years of decline before 2020, our market-neutral investment, AQR Style Premia, delivered a 13% return without relying on stock market growth, resulting in a cumulative return exceeding 80% over the prior three years.  This investment reflects the importance of maintaining a disciplined investment process that is consistent over time, and driven by a focus on long-term, evidence-based methods of investment.

Our private real estate investment had a negative return of ~8%, primarily driven by higher interest rates reducing the prices investors are willing to pay for real estate.  The largest component of the fund is invested in high-quality holdings in large apartment complexes, with office space reflecting ~10% of the fund.  At the beginning of the year, we reduced our level of investment in real estate by ~50% to fund greater ownership of reinsurance, as the interest rate environment was favorable for reinsurance and relatively unfavorable for real estate.

Economic Outlook

Across the globe, major economies continue to expand, despite elevated short-term interest rates.   The impact of higher interest rates on the economy typically takes effect with a lag, with the full impact of 5% short-term interest rates potentially not fully reflected in the current rate of growth.  Economic indicators continue to suggest growth into the future, including surveys of purchasing managers, corporate profit margins, and employment levels.  The second largest economy in the world, China, continues to lag other major economies as the costs of absorbing an excess of real estate debt and lingering impacts of strict COVID-19 prevention policies dampen economic growth.

Inflation has continued to moderate, from a 2022 peak of ~9% to ~3% at the end of 2023.  The Federal Reserve maintains a stated target of 2% for inflation, and while bringing inflation down from very elevated levels to 3% is relatively straightforward, the move from 3% to 2% may be challenging and require a longer than expected time with higher interest rates in effect.

Please reach out to us if you have any questions regarding your portfolio, and we’d be glad to address them.

This communication contains the opinions of Wade Financial Advisory, Inc. about the securities, investments, and/or economic subjects discussed as of the date set forth herein. This communication is intended for information purposes only and does not recommend or solicit the purchase or sale of specific securities or investment services. Readers should not infer or assume that any securities, sectors, or markets described were or will be profitable or are appropriate to meet the objectives, situation, or needs of a particular individual or family, as the implementation of any financial strategy should only be made after consultation with your attorney, tax advisor, and investment advisor. All material presented is compiled from sources believed to be reliable, but accuracy or completeness cannot be guaranteed. PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. INVESTMENTS BEAR RISK INCLUDING THE POSSIBLE LOSS OF INVESTED PRINCIPAL.

Wade Financial Advisory, Inc. is an investment advisor registered with the Securities and Exchange Commission. Registration of an Investment Advisor does not imply any level of skill or training. A Copy of current Form ADV Part 2A is available upon request or at www.advisorinfo.sec.gov. Please contact Wad Financial Advisory, Inc. at (408)369-7399 with any questions. 

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Ahead of the Curve: Financial Planning for Early Retirement Success

There are many factors outside our control that can impact our retirement timeline – economic volatility, new legislation, or even a global pandemic – all of which can throw us off course enough that even the most well-planned retiree must make changes. This is part of what makes early retirement so challenging, so it ends up being a dream that fewer and fewer people manage to achieve. In fact, polling shows that American workers are retiring at later ages than they have in the past three decades. Still, achieving early retirement is not an insurmountable task. With careful financial planning and discipline, it can become a reality. If you are dreaming of leaving the workforce early, below are ten strategies to help you with financial planning for early retirement so you can stay ahead of the curve.

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Kary J. Meschke Joins Wade Financial Advisory Team as Associate Advisor

Meschke Brings Experience, As Well as Recent Honors and Awards

Wade Financial Advisory is pleased to announce the addition of Kary J. Meschke to the team. Meschke began in the role of Associate Advisor in July of 2023 and brings six years of experience in assisting with comprehensive financial planning.

“I have a deep commitment to exceptional client service,” Meschke says. “I’ll focus on deep-diving into complex tax planning and the constant need to adapt to new legislation in this area.”

Meschke received her Bachelor of Science degree in Wellness Management from Black Hills State University. She also holds a Certificate of Financial Planning from the Boston Institute of Finance/Bryant University and is a Certified Divorce Financial Analyst through the Institute of Divorce Financial Analysts. She has worked in personal finance for more than six years, serving as an Account Administrator, Client Relationship Coordinator, Wealth Management Advisor, and Portfolio Manager prior to joining the Wade Financial Advisory team.

Recently, Meschke received the distinct honor of being named to the 20 Under 40 class of 2023 in Flathead Valley, Montana, as well as placing 1st in Best Financial Advisor in Best of the Flathead 2023.

To learn more about Kary J. Meschke or any member of the Wade Financial Advisory team, please visit our team website.

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Wade Financial Advisory Welcomes Stephanie Wong as Tax Manager

Continued Team Expansion Will Support Enhanced Client Service

Wade Financial Advisory is pleased to announce the addition of Stephanie Wong to the team. As Tax Manager, Wong is tasked with improving procedures and processes for the tax division and assisting in all tax matters.

“I am committed to helping clients better understand their taxes,” Wong says. “This helps them plan ahead and achieve their financial goals.”

Wong earned her BBA in Accounting and Finance + MACC (Master of Accounting) from Abilene Christian University, and her MPA + certificate of Charitable Financial Planning from Texas Tech University. Prior to joining the Wade team, she spent two years tax planning in a financial service company and three years in a local CPA firm in Lubbock, TX.

You can learn more about Stephanie Wong and the full Wade Financial Advisory team here.

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