Snapback
May 21, 2025
Dow: 41,860
Has this most recent market correction been that different than other recent corrections? We think not. In a typical correction, the market declines based on concerns about future prospects for the economy, for a time those fears feed on themselves, and subsequently new information or a change in expectations serves to partially or fully reverse those concerns. The concerns that initiate the correction are valid, but in time, they are resolved or turn out to be less onerous than expected. Often, market participants overestimate the potential damage that may be caused by the perceived risks. That certainly seems to have happened this time around.
Another way corrections are resolved is through adaptation to new information. President Trump may have expected China to roll over in response to the new tariffs, and they did not. Also, we have said before that there are curbs on Trump’s tactics; the market, Congressional Republicans, and the electorate as a whole each have the power to force Trump to change tactics. That isn’t necessarily the case with the China tariffs at this point, as both sides decided a cooling off period was warranted. Nevertheless, it appears that a path of de-escalation in the tariff wars has begun.
We have always believed that economic environments that are untenable or can’t persist, won’t for long. An economy with reciprocal tariffs of 100% or more between two global trading partners is one of those economic environments. It is also clear in hindsight that many economic participants realized that this tariff level could not remain on a longer-term basis. If importers expected the tariffs to remain longer term, they would have raised prices immediately to expand profits and cushion the shocks that were to come. This did not happen. Inflation, by many measures, has actually continued to decline over the past few months to new four-year lows.
As the stock market has moved back towards new highs and volatility has declined, the prospect of near-term rate cuts from the Federal Reserve Bank (Fed) has declined and short and long rates have drifted upwards. The Fed has continually warned about tariff-driven inflation, and as those fears subside, rate cuts in the back half of the year could add further support to both the equity and fixed income markets.
The rebound in the equity markets has roughly coincided with the majority of earnings announcements for the first quarter. There is no doubt that some of the rebound was due to an easing of tariff fears, but some must also be attributed to a strong first quarter earnings season. Many companies declined to give forward guidance due to potential tariff uncertainties, but first quarter results and lower stock prices were enough to bring in net buyers.
Intermediate maturity Treasuries maturing in two to seven years have moved lower in yield so far this year. This is a warning to us that many market participants still fear a recession, or fear that the Fed is holding short rates too high in the current environment. Inflation indicators have been moving lower over the past few months, and if that move is sustained, we expect the Fed to, perhaps grudgingly, cut rates this year. Expectations for second quarter GDP have moved back to the 2-3% range after the first quarter dip, again indicating resilience in the economy.
Focus now turns to Washington on tax policy. The market largely expects the income tax cuts to be sustained, but there may be other changes and gimmicks in the “big, beautiful bill.” Tax law changes and the tinkering and horse trading involved can only serve as a net drag on growth and risk taking, as elected officials try to reward certain constituencies and punish others. It’s not pretty, we can only hope for a minimum of distortions.
We are thankful that we have the opportunity to guide investments during a generation when the capital and investment markets in the United States are the most vibrant and resilient in the world.
It seems appropriate to remember a famous Warren Buffet quote as he nears the end of his career:
“Be fearful when others are greedy and greedy when others are fearful.” -Warren Buffet
Uncertainty
March 28, 2025
Dow: 41,583
This word has become a cliché in the last two months, but it aptly describes what many investors view as the driver in the current environment. Trump entered office and immediately pushed forward aggressively on many fronts – immigration, government waste and deficits (DOGE), Ukraine, tariffs and all were areas of major policy change. He seems happy to let the courts ultimately decide if he has overstepped executive authority in some of these areas, but that will take time. It is certainly fair to call this the Trump correction.
Nevertheless, we all knew a correction was due; the only thing we didn’t know was the proximate cause. In October of 2023, the S&P 500 Index barely touched down 10% before rallying. The same has been the case so far in March. Prior to these two limited downdrafts, the market has been on a fairly steady track upwards since the bottom of the bear market in October of 2022. The gain in the S&P 500 since October 2022 has been over 70%. Growth stocks have generally declined more than value stocks, narrowing some of the large valuation discrepancies that have existed for years. Because many of the largest companies in the capitalization weighted S&P 500 Index are growth companies, they have had a large impact on index returns. Indeed 60% of the stocks in the index are actually outperforming the index itself. Periodically, we need corrections to keep valuations closer to the ultimate future prospects for the companies involved. It shouldn’t be as easy as buying NVIDIA and holding it forever.
Keep in mind that Trump wants to operate under unpredictable and uncertain circumstances. He doesn’t want those that he is negotiating with to be able to predict his next move. He is actually most comfortable operating in an environment of uncertainty. It was his modus operandi as a businessperson for decades. He used unpredictability to negotiate permits, the size and scope of his projects, and many bankruptcies and restructurings (and there is the possibility that it will lead to beneficial outcomes in our government and economy as well). We should not expect this core Trumpian strategic and tactical approach to go away. It seems as if this realization, consciously or unconsciously, is being built into market expectations in the form of an uncertainty premium.
The major initiatives that Trump has taken on create other risks as well. Consumer confidence and investor bullishness have declined as economic uncertainty has risen with Trump policies. Auto loan and mortgage delinquencies have crept higher, and stubborn inflation around 3% has held down real income growth. A slowly softening job market will also be a brake on real income growth. The tariff uncertainty will put a damper on capital spending, at least in the short term, for businesses that may be affected by these policies. It may even reduce capital spending in the tech sector, as customers of these companies may limit expansion in their capital spending.
So, we are left at a crossroads where there are potentially both significant positive and significant negative outcomes from current policy. The risks being undertaken may be reasonable when measured against the possible success that can be achieved, but we still have to make it through this period of risk. The market decline may have already discounted the potential negatives. The erosion of confidence that is currently taking place both in the economy and the markets can feed on itself over time. These factors are interrelated, so we will monitor these developments closely. The goals of lower tariffs in the long run and a more efficient, less costly federal government are worthy and lofty goals. The voting public believed these goals were worth the risks last November, we hope that communal wisdom proves correct.
Random Thought: “A government big enough to give you everything you want is a government big enough to take away everything that you have.” -Thomas Jefferson
Tariffs
February 18, 2025
Dow: 44,556
Much has been said about tariffs being inflationary, but we actually worry about them for a different reason: because they are contractionary. They tend to create a combination of reduced trade, consumption, and output. In some cases they reduce all three. Take the example of BYD, a Chinese electric car manufacturer. Think of a BYD as a cheaper version of a Tesla, more utilitarian, with lower performance, but with a greater range and efficiency. In 2024, the tariff on Chinese electric cars was raised to 100%, effectively delaying or preventing the entrance of BYD into the American car market. This reduced trade, as the cars were not imported to the U.S. It also decreased consumption, because if you had been able to buy a BYD instead of a less efficient and more costly form of transportation, you would have had thousands of dollars left over for other consumption. It also reduced output, because the cars that would have been sold in the U.S. were never built.
Tariffs are a cost and a drag on the economy because they increase the cost of an item without increasing its value or utility. So why aren’t they inflationary? Because if a household has a set amount of discretionary dollars to spend, they do not blindly accept the cost increase without making other changes to their behavior. There are three ways consumers and businesses react to tariffs. You can substitute if you can replace one good with another. If you cannot substitute, you buy less of the good. If you can’t substitute or buy less of a good, you buy less of something else to offset the higher cost. The last time we had widespread tariffs in the United States was in the 1930’s, and we did not get inflation, but we did get deflation and an economic contraction. This should be the main worry with tariffs.
Trump says he can use widespread tariffs to raise funds. Trump says a lot of things; we hope this one is not true. If increased tariff revenues were used to cut other taxes, that would help, but we know that’s not how government works. Depending on the elasticity of supply and demand, the producer may bear part of the tax to maintain sales by not raising prices to cover the tax. But, enough with economic theory. So far, it appears as if Trump wants to use the threat of U.S. tariffs to get other countries to reduce their tariffs and increase free trade. That would be a positive accomplishment, but we will have to see how the game of chicken, or the game of who has more economic leverage, plays out.
There are many positives to mention. The economy and the markets continue to show resilience in the face of the current policy uncertainty. The stock market is higher than when tariffs became a real concern at the end of January, and the ten year Treasury yield is slightly lower. Positive earnings surprises in the S&P 500 are the highest in three quarters. Corporate bond spreads are at multi-year lows. Bank stock prices are at multi-year highs. All of this is good news.
What gives us concern? Job openings in the economy are at a two-year low, although still far higher than they were pre-COVID. A larger amount of job openings drives higher real wages, a positive for employees. It also counteracts the effects of inflation. A lower number of job openings, like we are currently experiencing, could start to slow employment and wage growth. Inflation has become sticky around 3%. If we had to choose between 3% inflation and a healthy economy, or 2% inflation and a weaker economy, we would take the former. We hope Jerome Powell will keep this in mind. Existing home sales were at a multi-year low last year. Low housing turnover could lead to lower home prices, a benefit for those looking to buy their first home, but a negative wealth effect on those who already own a home.
We will watch closely both the positive tailwinds and potential negative headwinds in the market and the economy. For better or worse, Trump may bring real and permanent change at the Federal government level; it is still too early to tell. We will react to that change with the goal of both preserving and growing the portfolios we manage.
Random Thought: “Under our scheme of government, the waste of public money is a crime against the citizen.” – Grover Cleveland
A Review of Our 2024 Predictions
January 27, 2025
Dow: 44,713
Many strategists enjoy making predictions, but a review of past predictions is like a trip to the dentist for a root canal — something to be avoided at all costs. This is a shame because growth and improvement can come from self-examination.
Here goes…
The labor market will remain strong.
-Correct. Although the unemployment rate ended the year at 4.1%, up from 3.8% at the end of 2023, sometimes unemployment increases early in a recovery as more individuals reenter the labor force to look for jobs. Total employment in the U.S. increased by 2.2 million persons in 2024.
Real wage growth will accelerate.
-Correct. Due to the increase in inflation, real wage growth was negative from early 2021 until early 2023. In the second half of 2024 real wage growth accelerated to a rate of over 1% per year.
Household wealth continues to grow at a healthy clip.
-Correct. Household wealth continued to grow due to real wage growth, single digit increases in home values, and strong stock market returns.
Interest rates continue to fall.
-Wrong. Short interest rates fell about 1% in 2024, but longer rates ended the year up about half of a percent. Unfortunately, most consumer and corporate borrowing costs, including home mortgages, are tied to longer rates.
Inflation will be below 2% in 2024.
-Wrong. We were too aggressive here. Consumer inflation did fall from 3.4% in 2023 to 2.9% in 2024. The trend still seems to be for lower inflation going forward, and that is good news for both consumers and investors.
Private credit will be a problem.
-Wrong. There is still a huge appetite for private credit and other alternative investments. More of these types of investments are being packaged and pushed downstream to smaller investors. Those in the food chain that are creating these investment products are making a great deal of money. Let’s hope there are some crumbs left for the end investors, and that they can get out of these investments when they wish.
FOMO (Fear of Missing Out)
-Correct. We said, “There is more room for cash to flow into the market in 2024” and that people will not be satisfied with a 5% return from cash.
You will hear less about Artificial Intelligence.
-Wrong. It is still early in the evolution of AI, and it is impossible to gauge the ultimate effect on society. We are also still in the optimist phase of the investing cycle for AI.
GLP-1 (Obesity drugs) will be the AI of 2024.
-Correct. Like AI, these weight-loss drugs are going to permanently change society in ways we may still be unable to fully comprehend.
The stock market will broaden in 2024.
-Wrong. The largest stocks were again the place to be in 2024. It would be healthier if this trend would begin to reverse itself. Maybe 2025 is the year.
The S&P 500 will gain more than 10% in 2024.
-Correct. This one was an important one to get right. Maybe it should count double.
Either Biden or Trump will not make it to the general election.
-Correct. Wow. For a time last year, there was a chance neither would make the general election. What a roller coaster ride it was.
So, overall, seven right, five wrong. We like to think we got the important ones right. As Yogi Berra said, “It’s tough to make predictions, especially about the future.”
Random Thought: “The best way to predict the future is to create it.” – Abraham Lincoln
Through the Looking Glass
December 30, 2024
Dow: 42,573
This year was an exceptional year for most markets and while every year has surprises, several events played out very close to our predictions. We’ll reflect on our 2024 predictions in early January, but here are some thoughts to consider for 2025:
GLP-1’s – GLP-1 drugs have been a significant breakthrough for those struggling with obesity, offering substantial long-term health benefits to society. However, as the hype settles, we would expect the risks of these drugs to get more scrutiny. Some of the long-term risks may include pancreatitis, gastroparesis, thyroid cancer, bowel obstruction, vision loss, and depression.
Growth Pothole – There are already signs of slowing in the new home market, stemming from both high prices and high mortgage rates. If this flows through to other areas of the economy, we would expect to see GDP dip below 2% sometime in the first half of the year.
Growth Recovery – Following a downshift, we would expect GDP to recover smartly later next year. Real income growth should increase as inflation continues to slow, supporting consumer confidence. Tax and regulatory policy should swing more pro-business. We would expect GDP growth for the year to be above the high 2% range expected for 2024.
Stock Market – This market is very ripe for a correction after the run of the last two years. We would expect it to come early in the year, along with the growth slowdown scare. It is amazing how many strategists predict single digit up years for the stock market when they aren’t that common. We will call for another year of double digit returns. This is the money pick, as it has happened 60% of the time over the last 30 years.
China Fail – China is burdened with a great deal of nonperforming debt. The country may already be in a recession. Foreign investment in China has pulled back, and it will take time to work off the bad debt overhang. Avoid investment in China.
Home Price Correction – Softness is already beginning to appear in housing turnover. New home sales have slowed and inventory is building. Home mortgages near 7% are a drag, and those should drift down during the year. National home prices may still increase in the low to mid-single digits in 2025, as the housing market is very localized. Cities that have had booms, like Denver, Austin, and Orlando, may see double digit corrections.
Private Debt Problems – We called for a correction here last year, and it did not happen. It is still a case of far too much money being pumped into an area with little oversight and a high fee structure, along with low liquidity and low transparency on prices. This is usually a recipe for eventual disaster. Retail products are available that are backed by illiquid loans. Distribution to retail usually means the end may be near.
Immigration Backlash – This is happening in the United States, and it will continue to play out in other major countries, including Canada, France, U.K., and Germany. The political upheaval currently experienced by these countries is mainly driven by immigration concerns, and multi-party countries are having difficulty forming governments. The natural result of immigration concerns will be the continued rise of Nationalist parties in many of these countries.
Inflation – Inflation should continue to drift lower, along with the Fed Funds rate and rates across the yield curve. This will also be supportive to the equity markets and smaller capitalization companies. We have seen in 2024 that the economy and markets can survive 3% inflation. Lower inflation should be a bonus.
Trump Agenda Slowed – Perhaps Congress’ greatest skill is blowing a lot of hot air while accomplishing nothing. Trump does enter with some momentum, so it will be interesting to see what he prioritizes in terms of legislation in the first six months of his administration. The margins are tight, so he will have to give ground in some places to push through his major initiatives. Congress is always focused on the next election, and since the party margins are slim, we may see coalitions developing between the most conservative Democrats and the most liberal Republicans.
Thank you for the opportunity to work with you and we wish you a healthy, happy and prosperous New Year!
Random Thought: “The music of your youth stays with you throughout your life.” – Dick Clark
Risk and Opportunity
December 4, 2024
Dow: 45,014
The election is in the rear view mirror and the market is at new highs — what should investors do? We have always been big proponents of staying within your risk range regardless of market levels or geopolitical conditions. All three finalists running for President this year (Biden, Harris, and Trump) were judged by a large minority of the voting populace to be unqualified. We were destined to end up with one of the three. The world did not end, and now we can move forward knowing the result of the election.
In times of stress and uncertainty, we think of the example of 9/11/2001 and are reminded of the resilience of the American spirit. More Americans died on that day than at Pearl Harbor or D-Day. This supreme tragedy took place five blocks from the New York Stock Exchange, what many think is the heart of American capitalism. Nevertheless, it only took one month for the S&P 500 Index to recover to its September 10, 2001 closing level.
We believe that one of the keys to long-term investment success is to limit short-term emotional reactions. This is always difficult to do in the heat of the moment. We have found that the best way to resist the short-term urge to overreact is to think about your risk range, or tolerance level, before your emotions are tested. What range of stock allocations am I comfortable with? Will I have regret if my allocation is lower? Will I be able to sleep if my allocation is higher? Sometimes getting to the right risk range is a product of trial and error. It also changes throughout our lives, based not just on our age but also on our investment and life experiences.
There may be some who are feeling despair because of election results while others are elated. Some may feel elation because of their technology investments. Others may feel despair or regret because of their investments outside of the tech sector. All of our Strategies focus on finding investments that can be successful in various market cycles and such investments are always out there. Some market periods are harder than others, but with skill, diligence and patience, the odds of success increase over time. We are optimistic as we look for companies and investments that can execute their plans in most markets.
Because of the current events in the Ukraine and the Middle East, we are reminded that the world is a dangerous place and we have to be a force for good in the world. A large part of what is called the American spirit is evidenced in the success of American businesses and capital markets. We have a chance to benefit from these markets, both as investors and customers.
As we draw near to the end of 2024, we wish all a safe and joyous holiday season.
Random Thought: “There’s nothing you can do in the interest of being above average that does not expose you to the risk of being below average.” – Howard Marks
Pay Attention
August 29, 2024
Dow: 41,335
We are talking to Jerome Powell, not our readers and friends.
For a good number of months, and a good number of FOMC meetings, it has been all about inflation, inflation, inflation, and very little about the other part of the mandate for the Federal Reserve, maximum employment. The Federal Reserve was right to focus on inflation, and slay that dragon, before turning their attention to other matters. Inflation has finally begun another leg downward after bouncing around the low 3% level for most of this year. Based on the readings for the last few months, it should continue to trend towards 2%.
Hopefully this has given the Fed the ability to focus on the rest of the economy and not just inflation. We think they are now paying attention to unemployment, wage growth, commercial real estate values, productivity, and industrial output. This should make it easier for the Fed to cut rates more quickly in response to any economic weakness if inflation concerns are in their rear-view mirror. The new normal expectation for rate cuts is at least one per meeting for the foreseeable future. We feel comforted that both the stock and bond markets have those expectations as a backdrop. All in all, we think this makes it less likely that the Fed will miss early signs of a slowdown because they are too focused on the 2% inflation goal.
Both unit labor costs and average hourly earnings have been trending downward; the belief that employees would demand that employers compensate them for past inflation losses seems to have passed. Overall GDP growth has been running at a strong 3%. All of these are good signs so far, with inflation moving lower while the economy is still showing strong growth. Our concern is that Fed policy operates with a lag. We hope it is not the case, but they may find that they kept rates too high for too long, even as they begin cuts. Our concerns will ease if the economy stays resilient through the Fall as the Fed begins to cut rates.
Fixed income returns have bounced to very attractive levels as interest rates have begun to fall across the curve in anticipation of Fed rate cuts. After rising through the first four months of the year, rates have moved lower and are now below where they stood at the end of 2023. This move should help provide a tailwind for the economy and the bond market, and slightly eases our concerns about valuation levels in equities.
As we have emphasized in many client meetings, the S&P 500 Index is now much more of a growth stock index because tech stocks occupy the largest six positions in the index and make up almost 30% of the total market value of the index. Growth stocks are far more sensitive to changes in the expected trajectory of their growth or earnings since future earnings account for a large part of their valuation. When price/earnings ratios are high, as they are now, there is little patience for companies that don’t beat their earnings and revenue targets. Even though earnings reports have been above expectations for the second quarter, and the stock market is near all-time highs, we would not be surprised if the market moved sideways for a while.
This is not to say that equity allocations should not be maintained, as we haven’t found the person who can predict future moves. But certainly, expectations for future earnings have continued to increase, and the valuation levels on those future earnings (P/E ratios) have also increased. Even if the market moves sideways, it gives time for future earnings growth to bring the valuation level on the market down. That sets up a future move upward.
Random Thought: “Your time is limited, so don’t waste it living someone else’s life” -Steve Jobs
Good News Bad News
June 26, 2024
Dow: 39,128
Let’s just start by postulating that the stock market is not cheap, as valued by price to earnings. Markets that are at all-time highs never are, and markets normally get to new highs by having price gains outpace earnings gains. The title of this Viewpoint might lead you to believe that we are going to equivocate, an unpleasant habit of many market prognosticators, which ends up offering no help to the investor. The goal is to offer insight as to what factors are most important to the markets right now and how they might influence future market returns.
Earnings are one of the most important factors in moving the markets. It is not their absolute level or rate of growth that moves markets, but their levels and rate of change relative to consensus expectations. The consensus does not always end up being predictive of actual results. Our portfolio managers can be most positively impactful to portfolios when their opinions differ from the consensus and they are correct.
First quarter earnings reports provided the largest magnitude of positive surprises in over two years. These reports came out in late April and early May, during a time when the market was in a sideways consolidation following a 23% gain in the previous two quarters. The slight market downturn of about 5% in April was no doubt softened by the strong earnings reports relative to expectations. As these reports have been digested, the equity market has moved on to new all-time highs.
Let us restate that the market never looks cheap when it is at all-time highs, and it gets there by having some future potential gains pulled forward. The bar only gets higher for investable companies. One factor that makes us optimistic is that the rate of inflation has moved to a rate that is below the rate of income growth. Buying power is increasing, and employees should expect to recover most of what they lost to inflation.
Asset prices should also provide a boost to consumer sentiment, even though they also increase inequality. Over the last five years, the S&P 500 is up 15% annually, and home prices across the nation are up about 50% in total. This should continue to provide a sentiment boost to spending. For those that have owned their current home for a number of years, it also provides a large spending reservoir that can be tapped through home equity loans.
Although it is only at 4%, the unemployment rate is at its highest level since early 2022. An unemployment rate that moves up slightly from historic lows can actually be a good thing for the economy because it helps reduce the scarcity and cost of labor. It also typically represents people reentering the labor force and looking for work – a sign of economic optimism.
As inflation continues to stabilize or move lower in fits and starts, and concurrent economic indicators do not continue to strengthen, pressure increases on the Fed to begin to reduce rates. Market interest rates have stabilized or drifted lower this quarter, beginning to anticipate Fed rate reductions. This has reversed the negative returns that most bond investors experienced in the first quarter and offers bond investors a wonderful opportunity to earn attractive returns well above inflation. Money market rates have likely peaked, so we see value in extending maturities to lock-in higher yields longer.
The good news is that the economy has remained relatively strong despite higher interest rates and somewhat stubborn inflation. The bad news is that growth may be plateauing or slowing, and the lagged monetary effects of the Fed tightening may be in their early stages. The best news may again be the resiliency of the American economic machine. American innovation leads the world, and the current advances taking place could mark a continuation of the current prosperous era.
Random Thought: “The sun illuminates the world, knowledge illuminates a man.” -Mongolian proverb
The 12 Predictions of 2024
December 21, 2023
Dow: 37,404
Loosely modeled on the 12 days of Christmas.
The labor market will remain strong.
Real wage growth will accelerate.
Household wealth will continue to grow at a healthy clip.
Interest rates will continue to fall.
Inflation will be below 2% in 2024.
Private credit will be a problem.
FOMO
You will hear less about Artificial Intelligence.
GLP-1 will be the AI of 2024.
The stock market will broaden in 2024.
The S&P 500 will gain more than 10% in 2024.
Either Biden or Trump will not make it to the general election.
Everyone at Dana sends their best wishes for a healthy, happy, peaceful, and prosperous 2024.
Thankfulness
November 28, 2023
Dow: 35,417
It should not be cliché to say that we have much to be thankful for. We live in the democracy that has led the world for most of the past one hundred years. Our economy has continued to thrive on innovation. All of our largest technology companies were founded in the last fifty years; three of them have been around less than 25 years. They have been a key to the continued growth and prosperity in this country and around the world, and are supported by thousands of smaller companies, many of them also entrepreneurial success stories. There are many investment opportunities outside of the largest tech companies, as valuations outside of tech are currently below average, and the economy is continuing to expand.
Regarding the economy and markets, we are most thankful that the economy has endured the Fed rate hiking cycle and seems to have thrived in spite of the flurry of rate increases. Real GDP rose 5.2% in the third quarter, the strongest quarter of growth since 2014, aside from the post-Covid bounce. We have also experienced a productivity bump, with real GDP expanding more than 7% since the end of 2019, while unemployment has only increased 1.5%. This productivity increase is positive and has helped the economy deal with the bump in inflation. The S&P 500 Index has almost fully recovered from its recent July-October correction. The landscape looks very different today from the beginning of the year when the end was not in sight for rate increases, trailing inflation was still above 6%, and earnings declines were widely expected.
Unemployment is going up for the right reasons, as more people join the labor force. The elasticity of labor supply will help mitigate fears of a resurgence of inflation driven by demand increases and a more limited supply of labor. This is one case where unemployment increases due to growth in the labor force are a good thing as long as overall job growth continues to expand, and it has.
While the rebound in stocks can be attributed to the end of rate increases and the resilience of the economy, we can also be thankful for the recent decline in longer term interest rates. Over the last five weeks, longer rates have declined about 70 basis points, offering some relief from impending borrowing cost increases. Even the red hot housing market shows signs of leveling off, as existing home sales have dropped significantly.
With employment growth remaining strong, consumer confidence should also remain strong, or even strengthen, into 2024. Much of our economy is driven by confidence. It drives financial transactions of all types, including driving individuals and companies to spend and invest. If we do not experience disinflation next year, we should enter an environment where real wage growth should strengthen and families will recoup some of the purchasing power they lost in 2021 and 2022.
We are also thankful to announce that three of our investment strategies were named to PSN’s Top Guns List of best performing separate accounts, managed accounts, and managed ETF strategies for 3Q 2023.
We are proud of these three equity strategies’ notable 3Q rankings and are already hard at work with the goal of achieving similarly strong rankings and results for our investors in 4Q. Published quarterly by Zephyr, the highly anticipated PSN Top Guns list is one of the most important references for investors and asset managers. Rankings are tabulated for thousands of strategies across 75 peer groups subdivided by increasingly rigorous screens and reported in ascending classes from 1-6 stars.
At Dana, we are thankful for a challenging work experience that supports personal growth, excellent colleagues with which to share our career journey, and clients that we are fortunate to serve and with whom we have built beneficial and lasting relationships
Random Thought: “Showing gratitude is one of the simplest yet most powerful things humans can do for each other.” – Randy Pausch, author of The Last Lecture
[2-Star Category:] had one of the top ten returns for the one-year period in their respective strategy.
[3-Star Category:] had one of the top ten returns for the three-year period in their respective strategy.
[5-Star Category:] had an r-squared of 0.80 or greater relative to the style benchmark for the recent five-year period. Moreover, the strategy’s returns exceeded the style benchmark for the three latest three-year rolling periods. Products are then selected which have a standard deviation for the five-year period equal or less than the median standard deviation for the peer group. The top ten returns for the latest three-year period then become the 5 Star Top Guns.