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Good day everyone.

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My name is Brian Andrew, Merit Financial

Advisors’ Chief Investment Officer.

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It’s been about a month

since we last spoke,

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and I’d like to provide you an update

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on what’s happening with markets

and the economy.

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The economic and inflation data we’ve

received continues to send mixed messages.

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Let’s go over what’s happened

since the last time we provided an update

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and make some sense of the data

and what’s happened in markets.

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The stock market has continued to rally.

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In the last four weeks,

we’ve seen the S&P 500 index move higher

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by almost 4%, and it’s up over 14%

since the beginning of the year.

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Much of this return,

though comes from just a few stocks.

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More on that in a minute.

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Bond yields have moved up and down

in a narrow range during the last several

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weeks, as investors try to sort out

when we might see some relief

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in the form of lower

interest rates from the Federal Reserve.

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Some economic data points have us

feeling like things are picking up,

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while others are a cause for concern.

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Let’s try to discern the difference

between the two.

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Pundits have been looking for a recession

for almost two years now.

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Yet we have seen a real economic

growth rate averaging over 2%

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for the last eight quarters.

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This seems to be the Goldilocks level

where the economy can run,

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keeping employment growth up

while not creating too much inflation.

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Though inflation has been a real problem,

it’s getting better.

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The inflation we experienced was primarily

a function of two things

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the post-pandemic sugar high

coming from government and Federal Reserve

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stimulus,

which increased demand in some sectors,

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and the supply chain shocks

due to the world’s rolling reopen.

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There are also some signs of weakness

in the economic and inflation data.

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The recent report on May

consumer prices was positive

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because it showed tepid price growth.

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There were pockets of outsize inflation,

though hotdog prices were up 7.3%

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and tickets to sporting events up 21.

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These are the prices that cause consumers

concern

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and politicians

running for reelection problems.

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Investors have swung from optimistic

about future growth

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and lower inflation

to being concerned about both.

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As we look through the rest of 2024,

we think we can expect more of the same.

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Investors are focused on

the level of interest rates

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and the future of the Fed Reserve’s

interest rate policy.

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Because the economy has performed

better than most expected,

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the interest rate cuts from the Fed

have been postponed.

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This means economic bad news

has been good news for investors.

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Markets anticipate that economic weakness

could lead to reducing interest rates.

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For example, the release of this most

recent CPI report put an interest rate

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cut back in the futures market

for the fourth quarter of this year.

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For now, interest rates

remain at the heart of asset prices.

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Looking at the movement of the yield

on a ten-year Treasury

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and the S&P 500 over the last six months,

you’ll find a very high correlation.

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When economic data has shown

weakness, expectations for inflation

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fall, and investors look for evidence

that the Fed will begin to cut rates.

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Lower interest rates can mean price

appreciation for bonds and potentially

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a better discount rate for corporate

earnings, which raises stock prices.

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Looking out over the next six months,

we expect this environment to continue.

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The economy may continue to show a mixed

bag of data, pushing interest rates around

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in the same trading range they’ve been in

since the beginning of the year.

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Of course, any outlook must consider the

geopolitical environment we’re living in.

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2024 is an unusual year,

and that over half of the world’s

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population will vote in a general election

for leadership.

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This has the potential to change

government fiscal policy

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and create market uncertainties

impacting asset prices.

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In the last month,

we’ve seen elections in India, Europe

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and Mexico

disrupt stock prices on a near term basis.

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India presents a good example.

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The current Prime Minister, Modi

and his party were thought

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to retain their support

and perhaps even find more strength.

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Instead, the election delivered a surprise

with them losing seats.

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Their stock market weakened, interest

rates rose and the currency was devalued.

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Because these events are hard to predict,

we run portfolios through a scenario

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analysis looking at different potential

outcomes, their impact on prices,

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and then determine how to weight

those probable outcomes over time.

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This approach helps us manage

risk and provides insights to advisor’s

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clients as to how to understand the care

and planning and investing approach

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during uncertain times.

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Don’t forget to follow Merit

on social media to be the first

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to hear exciting company news

and our latest market updates.

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Please reach out to your Merit

financial advisor

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if you have any questions,

and I’ll see you next time.