Columbus Wealth Management 2023 Q2 Newsletter
Thank you for reading our newsletter! For those of you joining for the first time, we post these newsletters at the start of each quarter to keep you updated on our firm, your portfolios, and other relevant issues. We will also include a current educational topic for our clients who want to understand what we are doing for them in more detail. For those of you who are not working with us, please reach out if you feel you could benefit from these strategies. We hope you enjoy, and as always, please don’t hesitate to contact us with any questions or feedback!
Max celebrated his 6-month birthday on June 21st! His family loves watching him grow up. He is a happy boy, full of lots of giggles and smiles, but Nick and Kelli have come to realize not every baby “sleeps like a baby…” He is a world traveler already, and has played on the beach in Grand Cayman, Hilton Head Island, and Pelee Island!
Columbus Wealth Management Updates
Matthew completed a 6-month program with XY Planning Network which involved collaborating with other successful Wealth Management firm owners across the country. We compared notes on portfolio management strategies, technology, and marketing. We look forward to opportunities like this so we can continue to provide the best experience for our clients!
The pause on federal student loan payments is coming to an end, and all borrowers should plan to see interest accrual resume on September 1, with payments resuming in October. However, the Biden administration announced that for 12 months following the Supreme court ruling last month, missed payments will not affect your credit score. In addition, borrowers will not have any balances “forgiven”, per the Biden administration’s earlier plan. For those with student loans, we recommend re-examining your monthly cash flow plan and encourage you to reach out to us if you need guidance!
You can learn more about how the recent Supreme Court decision affects student loans HERE.
Market Update & Investment Commentary
Data as of 6/30/2023 (unless stated otherwise)
With the S&P 500 now up 16.9%, and the Bloomberg US Aggregate Bond Index up 2.1% year-to-date, markets are well on their way to reversing last year’s losses. It would take another 9.4% gain over the next 12 months to get back to the January 2022 peak for the S&P 500. This is great news for those that have remained invested during a very turbulent market. Nearly all major asset classes are now posting gains for 2023, except for commodities (down 7.8%). We’ve seen plenty of conflicting headlines in the news over the last 18 months, and many of you may be wondering, what’s next?
Inflation has continued to come down with headline CPI posting a 4.1% year-over-year increase in May. Many experts believe we will see this number continue to fall throughout the year as food and energy inflation have come down considerably, and we are starting to see housing-related inflation moderate too (which makes up over 2.5% of the 4.1% inflation figure). The Federal Reserve doesn’t appear to be signaling that this will cause them to stop interest rate increases, but it has slowed them down. They didn’t raise rates in June, keeping them at a range of 5% - 5.25%, but signaled they expect to raise rates again in the coming months. Future raises will likely depend on inflation, the strength of the job market, and whether any other “cracks” develop in the economy, such as with the Silicon Valley Bank collapse earlier this year. We believe that the chances of seeing a recession this year have diminished significantly. We also think if we do see the economy falter, the Federal Reserve will likely react by dropping rates, perhaps even more rapidly than in prior cycles.
Along with falling inflation and strong employment, we also saw the passage of a debt ceiling bill last month, narrowly avoiding default on the national debt. Another big thing helping the economy is a $6.5 Trillion increase in household net worth so far this year (nearly eclipsing an all-time high). This is helping to prop up consumer spending, especially among wealthy households. However, further upside on consumer spending could be limited since many average households are still fighting to maintain a higher standard of living developed during the pandemic by digging into their savings and racking up credit card debt, which can’t continue forever. Businesses may also pull back on capital spending, since many banks have tightened lending standards after the banking issues we saw earlier in the year, but this isn’t likely to have an overwhelming effect on the US economy unless it’s accompanied by a significant decline in consumer spending which makes up about 68% of overall Gross Domestic Product.
In summary, things are looking pretty good! At Columbus Wealth Management, we never attempt to predict the direction of the market (especially in the short-term). Instead, we focus on what we can control by building diversified, low-cost, and tax-efficient portfolios that are designed to meet your goals in both good and bad markets. We revisit our clients’ financial plans regularly to ensure they stay on track and stand ready to help when life gets in the way.
For a fun lesson on how rapidly media headlines can change (and how reacting to them by altering your portfolio may not be such a good idea), check out these headline clippings from the Wall Street Journal, which are just over 5 months apart:
January 15, 2023:
June 26, 2023
Thank you for reading!
Your team at Columbus Wealth Management