Weekly eLetter 5/26/2023 – We Must Remember This…
This is Memorial Day weekend. Millions of Americans will be celebrating with friends, participating in a cook-out, watching the Indianapolis 500 or any number of other kinds of fun.
We would like to humbly ask everyone to take a moment to recognize that there is a somber side to Memorial Day. It’s a day that we may celebrate but also to commemorate. It is a good thing that we celebrate our freedom. It is also a good thing to commemorate those who gave their lives to preserve that freedom. So, have a great weekend of celebration but do give a moment of remembrance and help us keep the memorial in Memorial Day.
Ron’s Market Minute – A Tale of Two Markets
Lately, when I’ve been asked about the performance of the stock market, I’ve had to say it’s an incredibly bifurcated market. The performance has been almost entirely related to the dominance of AI (artificial intelligence) companies such as Nvidia, Microsoft, Alphabet, Meta, Advanced Micro Devices, Synopsis, Amazon.com, Palantir, Salesforce, Apple and ServiceNow. These companies have experienced significant gains, with Deutsche Bank reporting a year-to-date gain of 33.3% for their basket of ten mega cap tech names.
However, the rest of the market hasn’t fared as well, and investors focused on portfolio diversification have seen less favorable returns. The remainder of the S&P 500 index, consisting of 490 stocks, is down 0.5% for the year. Value stocks, dividend payers, small caps, and mid caps have also experienced modest gains or losses.
The rest of the market owes its less-than-stellar return to various macro headwinds that the market is facing. These headwinds include concerns about a looming recession, the Federal Reserve’s stance, inflation, bank failures, money supply issues, the possibility of a credit crunch, and the risk of defaulting on the country’s obligations.
Despite some positive factors such as a strong consumer, ample job opportunities, favorable inflation trends, and potential actions from the Federal Reserve, the macro concerns have kept the majority of stocks stagnant.
In summary, the stock market has seen significant gains for AI-related companies, while the broader market has faced challenges due to macroeconomic uncertainties. It is considered to be unwise to own a very narrow focused portfolio for conservative investors, however, I am reminded of the man who was riding thru the desert when a voice boomed out suggesting that he fill his pockets with some rocks from a riverbed and that in the next morning he would be both glad and sorry. He did so, although without much enthusiasm. The next morning when he awoke, he discovered that the rocks had turned to precious gems. He was both glad and sorry- glad that he had filled his pockets, and sorry he didn’t pick up more of the rocks. We are glad we have owned NVDA and APPL for most clients, sort of wished we had owned more, but as a fiduciary, glad we are keeping the risk levels down. Expecting a clearer market direction once the US Debt questions are resolved.
Ronald P. Denk, CFP®
Investment Advisor
Denk Strategic Wealth Partners
10000 N. 31st Avenue, Suite D406A
Phoenix, AZ 85051
Phone (602) 252-8700
Fax (602) 252-8701
Toll-Free (877) The-Denk
www.denkinvest.com
LFS-5707642-052623
*The indices are representative of domestic markets and include the average performance of groups of widely held common stocks. Individuals cannot invest directly in any index and unlike investments, indices do not incur management fees, charges, or expenses, therefore specific index returns will be higher. Past performance is not indicative of future results.
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Lincoln Financial Securities and Denk Strategic Wealth Partners and their representatives do not offer tax or legal advice. Individuals should consult their tax or legal professionals regarding their specific circumstances.*The indices are representative of domestic markets and include the average performance of groups of widely held common stocks. Individuals cannot invest directly in any index and unlike investments, indices do not incur management fees, charges, or expenses, therefore specific index returns will be higher.
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Past performance is not a guarantee of future returns – LFS-5390884-123022
