Broker Check


| April 18, 2024

“There’s a sucker born every minute…”     

 – P.T. Barnum


During the Civil War, the Union placed a blockade on Confederate ports. In August 1864, David Farragut

was given the task of closing the port at Mobile, Alabama, which had defied the order.

When Admiral Farragut ordered his fleet to proceed, one of the ships hit a mine and sank, causing the

rest of the fleet to hesitate. Farragut, however, was undeterred and famously exclaimed, "Damn the

torpedoes! Four bells! Captain Drayton, go ahead! Jouett, full speed!”

Today’s market has a similar ring to it. Investors are confidently navigating a minefield of uncertainties

as the Fed hopes to steer the economy toward a soft economic landing.  During the first quarter, the

broad-based S&P 500 Index notched 22 closing highs, and the Dow recorded 17, according to Dow

Jones Newswires. The Nasdaq posted four new highs.  Repeated new highs on the major market

indexes suggest the rally, which was concentrated in a few large stocks last year, is broadening.

“The Stock Market’s Magnificent Seven Is Now the Fab Four,” read a headline in the April 1 Wall

Street Journal. “It is a bullish signal that the market is rallying without the likes of Apple and Tesla,”

at least according to some investors. Dubbed the Magnificent Seven by a Bank of America analyst

last year, Apple (AAPL), Microsoft (MSFT), Nvidia (NVDA), Tesla (TSLA), (AMZN),

Meta (META, Facebook), and Alphabet (GOOG/GOOGL, Google) were responsible for a big chunk

of last year’s advance in the S&P 500. It seems surprising that the market could mount a rally

without Apple's leadership, but that's exactly what happened in the first quarter.

According to The Wall Street Journal, shares of Apple and Tesla slipped in Q1, and Alphabet

registered a more modest advance.  In other words, the Magnificent Seven is now the Fab Four,

at least according to the Journal. Nonetheless, the rally has broadened as other firms have picked

up the slack. The Magnificent Seven is still a force to be reckoned with. But its grip on key market

indexes loosened in Q1.

So, what’s been driving stocks higher?

The rate of inflation is off its peak, and the Federal Reserve has been considering rate cuts this

year.  Moreover, the economy is expanding, and corporate profit growth has been strong, according

to LSEG, formerly Refinitiv. Finally, the artificial intelligence (AI) locomotive has yet to show any

signs of slowing down. The labor market has also remained a bright spot in the economy.

Unemployment stayed near historically low levels, and the monthly jobs reports indicated

continued healthy job creation. We may have seen slight signs emerging that the labor market

was finally beginning to cool, with wage growth showing some moderation.  However, as long

as unemployment is low and people have jobs, it generally translates to a strong consumer

and good earnings for corporate America.


We are always mindful that pullbacks are simply an unexpected headline away.  Expect surprises.

No one can accurately see into the future. As we’ve come to learn, expect the unexpected.  There’s

always a catalyst, but we rarely recognize it far ahead of time. Bull markets create wealth for long-term

investors who adhere to a diversified and disciplined approach, but market corrections can’t be

discounted. They are inevitable.  We believe that having a diversified portfolio is the best way to

protect yourself against market volatility and achieve your financial objectives. While it won’t

completely shelter you from market pullbacks, it has historically proven to be a strong strategy

that can help you reach your financial goals.

What might create additional volatility?

Well, unexpectedly bad economic news could jar markets, as that would cloud the outlook for

corporate profits.  A more likely issue would be inflation concerns. Fed officials believe the recent

uptick in inflation is temporary. However, if the recent sticky inflation numbers prove to be, well,

stickier than expected, Fed officials could delay projected rate cuts.  As of the time of this writing,

Fed Chairman Jerome Powell has indicated that the U.S. economy, while otherwise strong, has

not seen inflation come back to the central bank’s goal of 2%, pointing to the further unlikelihood

that interest rate cuts are coming anytime soon.  While the current rate of inflation as measured

by the Fed is running 3.5%, which is well off the over 9% rate a few years ago, we are still well

above the Fed’s goal of 2%.  By the way, if I haven’t made it clear, stocks like low interest rates. 

Stocks especially like highly leveraged growth type companies, which Wall Street tends to favor. 

Frankly, looking at interest rates from a very basic and practical standpoint, what incentive does

the Fed have to cut interest rates at this moment in time? However, the economy is doing well

where interest rates reside currently.  There appears to be no imminent slowdown.  And, as

mentioned above, the Fed is concerned about inflation heating back up.  If they cut rates

prematurely, stocks would probably go crazy in the short-term creating a “wealth effect” or the

feeling that one could afford to buy more stuff. Mortgage rates would then come down, inevitably

pushing housing prices up even further as more affordable mortgages would increase demand. 

They would be fanning the flames of inflation rather than trying to extinguish them.

Also, they want plenty of bullets in their gun for when the inevitable rainy day actually comes, and

they have the need to use them.  Think of it this way, you’re on a giant prairie in Alaska and you

see a rabid bear about 1000 yards off.  1000 yards is pretty far.  You have a revolver that holds

6 shots.  Do you start shooting at the bear 1000 yards away when he may not even care about you,

could go in another direction, and you probably couldn’t hit him anyway, or do you save all your shots

for when the bear is 20 yards away and definitely looking to satisfy his hunger?  Well, the Fed would

rather use their ammunition when there is a more imminent threat than trying to forecast too far into

the future.

Additionally, another area of risk is international geopolitical tensions could spill into sentiment. 

Over the weekend, Iran launched missiles towards Israel.  As of yet, there hasn’t been a response. 

Tensions are high in the region and around the world, which is causing some angst in the markets. 

Traditionally, conflict hasn’t been a major driver of market declines in the intermediate to long-term,

but it can cause short-term volatility. More concerning might be rising commodity prices like oil. 

Higher oil prices act as a tax on the entire globe and can eventually eat into purchasing power and


The market has “felt” too easy the last month or so.  If you’ve been reading my weekly email

commentaries, you will know that I’ve been saying we are due for a bit of a breather.  No, I don’t

think the wheels are coming off, but as friend once told me, “Trees don’t grow to the sky.” There

is a natural order of things, and it is natural for a market that has been running hard to take a rest

and correct a bit to shake money out of weak hands into stronger ones.

When stocks tumble, it can be tempting to move away from equities and embrace cash. In the

long term however, that’s rarely profitable, as once-shy investors find themselves chasing the

market higher.

Conversely, a strong bull market can give one an aura of invincibility.  “Now’s the time to step

on the gas and load up on stocks,” some might say. A seemingly invincible market can encourage

too much risk-taking, which can be compounded when your golfing buddy constantly reminds

you about his/her newfound windfall and “trading skills.”

Yet, we caution against a more aggressive stance simply based on market action.


Oh, there’s one other little item I forgot to mention.  You probably haven’t given it a thought either. 

It is election year.  Never underestimate those who overestimate themselves. Need I say more? 

No, but I will give you a little more nonetheless.

I would be more concerned about bad economic policies before I would be concerned about

American consumers.  They are alive and well.  I could get into the weeds here, but I won’t. 

I will say the free market works when it is allowed to.  Sure, it needs a little oversight here and

there, but just a little.  The heavy hand of government regulation and red tape have stifled more

growth than any pandemic or short-term economic downturn could ever hope to.  People who

haven’t been well educated in real life economics are voting on economic issues more often

than we would like.  I guess we are the ones responsible for their power and authority, so

remember that come November.  There are lots of carnies out there.  Phineas T. Barnum is

purported to say, “There’s a sucker born every minute.”  Well, the rest of that quote you don’t

often hear is ”…and two to take him,” meaning there are a multitude of those wanting to take

advantage of the unsuspecting. This year’s election may indeed be the greatest show on Earth. 

Oh by the way, P.T. was in politics too.  How fitting.

As I write this, the stock market is still sitting close to all time highs.  It isn’t really overbought

nor oversold at the time of publishing, yet if I were a betting man, I would guess it will likely

retrace to some at least slightly oversold level because that is just how markets work.  They

move back and forth in a sometimes frustratingly slow fashion.  They aren’t easy escalators

to wealth, but they are wealth creation vehicles if one remains disciplined and doesn’t get shaken


Don't buy into the “us versus them” mentality this election season.  As I’ve said before, that's for

suckers and if you're reading this, you're no sucker.

If you have any questions or would like to discuss anything in this update or any other matter,

please feel free to give me a call.  As always, I’m honored, humbled and grateful you have given

me the opportunity to serve you.