Market Update and Portfolio Strategy

Spring is on the horizon, and with it, the state hockey tournament, which of course usually comes with a storm or two. The winter storm last night in MN was hopefully the last of the season! On the market front, the past week or so has felt like one large storm in its own right. We've seen new tariffs introduced, inflation showing both upward and downward trends, heightened geopolitical tensions, and ongoing uncertainty regarding monetary policy.

Amidst all this volatility, it's important to keep in mind that the earnings for the S&P 500 last quarter, excluding the "Magnificent 7" (Google, Amazon, Apple, Nvidia, Meta, Tesla, and Microsoft), grew by 12.3%, year over year, up from 6.0%. Even more remarkable were the earnings for the Magnificent 7, which surged to 25.5% compared to the previous quarter’s 22.2%. That said, stock prices have already reflected future earnings growth, which was also seen in last year’s market performance. This leaves less room for returns to match the highs of last year; however, these earnings figures don’t suggest a significant market downturn either.

So, corporations are doing well, but how is the U.S. consumer doing? The U.S. consumer remains in a relatively strong position overall. Wages are rising, unemployment is low, and inflation has stabilized. However, last week’s consumer confidence survey showed a decline, indicating that while the consumer’s financial position may be strong, their confidence has weakened.

We recognize that there are potential challenges ahead, but we’re well-prepared. In fact, I thought I’d point out there have been plenty of improvements at GMFG since my start date in March of 1995. Over those 30 years, the firm has made significant investments to help navigate these turbulent times. We've invested in people, processes, and technology. To give you some perspective, when I began, it was just two guys and a pen. Today, we have a team of 13 professionals, advanced data analysis tools, a dedicated investment research team, and relationships with top experts at firms like Goldman Sachs and JPMorgan.

Now, let’s talk about how we've been positioning your portfolios. In terms of your portfolios, we’ve been proactive. Late last year and earlier this year, we trimmed or eliminated equity positions that had become overvalued. With the proceeds, we have maintained some cash for future opportunities and rebalanced the remaining positions to align with target levels. We remain poised to make further adjustments as the market landscape evolves.

Finally, we understand that recent news may be causing some concern, but we remain confident that by focusing on the fundamentals of the economy and maintaining a diversified approach in your portfolios, brighter days lie ahead. As always, please don’t hesitate to reach out if you’d like to discuss anything further.
 

Best regards,
Jim