It's a time to take the controls, and be deliberate in taking risk
WASHINGTON, D.C. (Texas Insider Report) — Since 1952, the stock market's S&P 500 Index has experienced an average 7% gain during Presidential Election years. And with 2024 being an Election Year – not to mention that the economy's currently one of the biggest concerns for American Voters – there's great uncertainty as to what to expect as we move into the New Year. Though a 7% annual gain isn’t bad by any means, it doesn’t compare to the 17% average the S&P typically gains the year prior to an Election Year.
Already, J.P. Morgan analysts are estimating S&P 500 earnings growth to be between 2-3%.
As we close the books for 2023 and begin 2024, Americans across the country look to make a fresh new start – and we try to make practical New Year’s Resolutions. Many of those resolutions tend to include finances. In fact, Fidelity Investment's 2024 New Year's Resolutions study found that two-thirds of Americans plan to make a "finance-related" resolution.With money being top of mind for so many, there are several financial tips and tricks that may help you start off the New Year on the right foot.
Several financial institutions are predicting a more challenging macro-economic backdrop in 2024 – which looks at the overall general economy – and advise the best way to tackle the changing economy is to get more active in managing investments and growing portfolios.
For instance, the BlackRock Investment Institute's experts have said:
“This is not a time to switch on the investing auto pilot – in our view it's a time to take the controls.
"It's important to be deliberate in taking portfolio risk, and we expect to deploy more risk over the next year.”
But, how does one take such control, is the question?
"It's important to be deliberate in taking portfolio risk, and we expect to deploy more risk over the next year.”
But, how does one take such control, is the question?
There are several ways to do so. One way is to steer portfolio outcomes toward more involved investments.
For example, returns on short-term U.S. Treasuries have outpaced long-term bonds since mid-July of 2023. So a more engaged investment strategy, like making short-term investments, is likely to be rewarded in 2024. In a few words: Expertise is likely to give portfolios an edge in the new year.
If there’s a lack of financial expertise, or time to dedicate to active investing – which many don’t have – there are actively managed funds that can be purchased. These are either Mutual Funds or Exchange-Traded Funds (ETF) that are managed by portfolio managers amd-or investment experts. BlackRock recently launched the BlackRock Total Return ETF (ticker: BRTR), which is actively managed by Rick Rieder, BlackRock's Chief Investment Officer of Global Fixed Income.
They've recently released the new Total Return ETF due to the success of Rieder’s Flexible Income ETF – which attracted more than $330 million in flows.
Actively managed, the Wall Street Journal recenlty said that ETFs have gained a lot of popularity, and that "Investors Are Piling Into Actively Managed ETFs." The Journal noted that "ETFs are helping bring more complex trading strategies to the masses."
Throughout 2023 – and with the current outlook for 2024 likely to continue to grow – these types of Investment Funds are helping bring more complex trading strategies to more people, which is exactly the type of investing that is expected to be most successful in 2024.Texans can even invest in state-specific ETFs such as the Texas Capital Texas Equity Index ETF (ticker: TXS), a recently launched effort that's aimed to capitalize on Texas’s economic growth by investing in publicly listed companies headquartered in The Lone Star State.
While there's always the potential for loss and risks to investing, as one takes a more active approach there are tactics that reduce those risks down the road. Tax loss harvesting, for example, can be employed near year-end and throughout the year when evaluating a portfolio's tax efficiency.
Tax-loss harvesting involves selling an underperforming investment at a loss in order to offset other taxable gains within your portfolio. This strategy helps investors reduce tax burden by booking a loss to use that year, or carry forward, to offset up to $3,000 in ordinary taxable income. Next year, as the year starts to wind down, tax loss harvesting can be considered to reduce tax burden of capital gains.
In sum, the nation's investing environment for 2024 is not going to follow previous trends. While it could be a challenging year for market participants, it’s not going to be a year to sit on investments and go on autopilot.
While some 70% of Americans say they have a plan to reach their financial goals in 2024, adding other strategies to ensure your investments are stable and fiscally sound will always be a wise strategy to employ.
Your financially secure future can start today – with these and other insightful investment strategies.
