As we entered the new year, optimism pervaded the markets, and the likelihood of a recession seemed to diminish amidst the buoyancy that characterized the end of 2023. However, recent fluctuations in inflation data have injected uncertainty into both the general market sentiment and economists’ consensus. While the prevailing trend appears to be downward, there is a lack of clarity and decisiveness.  Our analysis suggests that inflation will remain a focal point throughout 2024, potentially leading to lower policy rates, albeit after enduring another month or two of unsettling headline figures. The shift away from the consensus view observed in December presents upside potential for investments sensitive to duration, encompassing both equities and bonds. Additionally, the notable surge in earnings estimates opens up opportunities for models.

Despite waning confidence in futures markets and the dissenting voices of a minority of Wall Street analysts advocating against rate cuts, we maintain a strong conviction that the Federal Reserve will indeed implement rate cuts in 2024, albeit at a more gradual pace, foreseeing 1-3 cuts by year-end. A temporary retracement following a sharp market rally would not be unexpected in the short term.

The LSA committee will be implementing model updates to the mutual fund, and ETF models.  These changes will be rolling out over the next weeks with a planned review of variable annuity models to follow.   Below you will find a breakdown of the upcoming changes:

• Posted Tuesday, April 16^th – ETF, ETF Tactical, PC IQ, Private Client Blended, Private Client Traditional, Private Client, Private Client Tax Efficient, PC Income Strat/Income Focus, Bear Market Entry, and Cautious Bear Plus – targeted model update – Tuesday, April 23^rd. (The IPC committee has extended the target trade date for ETF strategies to April 23^rd to accommodate a full review of the updated LPL ETFs.)
• Posted Friday, April 19^th – PC Income Strat/Income Focus, Impact Series, DFA, DFA Blended, American Funds, Fidelity, and Vanguard – targeted model update – Friday, April 26^th.

*The mutual fund model revisions impact the NTF models as well.

*As a reminder, the Revision Explanation Presentation/Video will be posted in the “Portfolio News” section on each of the platform home pages.

LSA Members: Please login to the LSA website to review the specifics of the model portfolio revisions, and to review the “Investment Rationale” explanation of the updates.