Quarterly Newsletter - Q4 2024

Market Performance

*As of 9/30/2024

Our Thoughts on the Markets

Sometimes a Cut is Just a Cut

Source: Ritholtz, Yahoo! Finance, chart as of 7/23/24

The Federal Reserve’s decision to cut interest rates was front and center in September with large implications for markets going forward. During this century, initial rate cuts have typically coincided with economic slowdowns (that developed into recessions in 2001 and 2008) or self-imposed economic retraction (Covid in 2020). However, not all rate cuts inevitably lead to recession or even market downturns.

Going back to 1970, the Federal Reserve has cut interest rates following a period of increases 18 times. Looking at the chart above, 11 of those times (61%) the US economy entered a recession within the next 12 months; but only five of those times (28%) the S&P 500 was lower 12 months later. Despite a larger than usual 0.50% cut in September, this action still appears to be a celebratory one instead of panic induced.

The data set here is too small to draw any statistical conclusions from, but one thing that can be agreed on is that each rate cut is different. Some have led to a recession while the stock market rises; others have avoided causing a recession while the market stayed flat. Time will tell what comes of this rate cutting cycle, but the path that the Fed takes on interest rates will continue to be driven by future inflation and unemployment data.

A Picture Tells a Thousand Words

AI Boom or Bust?

Source: Goldman Sachs, Yahoo Finance, charts as of 7/23/24

Our Key Takeaways

• Goldman Sachs report says AI productivity benefits more limited, AI returns significantly less, and AI power demands significantly higher than expected.
• ‘Training Data Crisis’ will likely lead to diminishing returns on development in the near future.
• The cost-to-benefit ratio of AI is vastly higher than internet adoption.
• “If important use cases don’t start to become more apparent in the next 12-18 months, investor enthusiasm may begin to fade”.

Election Cycles vs. Market Cycles

Our Key Takeaways

• Election years tend to be the second-best year for stocks – with the best year being the year before an election.
• Despite the averages, there’s a wide discrepancy in any individual year. For example, stocks have been down as much as 37% and up over 43% in an election year. If you are a long-term investor, you should not let election noise distract you from maintaining exposure to the stock market.

If you would like to read a more detailed summary of how elections relate to stock market performance, read our in-depth analysis.  

IRS Finalizes RMD Rules For Beneficiary IRAs

Source: Kitces.Com

Our Key Takeaways:

• The December 2019 SECURE Act made dramatic changes to Beneficiary IRA rules that lacked clarity around RMD requirements.
• Since then, various proposals have pushed the issue down the road without a definitive ruling.
• Final regulations were finally put forth by the IRS in July that specify who is required to take RMDs from a Beneficiary IRA and when based on relationship to the decedent and when the decedent passed.

Schechter in the News

Marc Schechter is Quoted in Financial Advisor Magazine About Managing Client Requests: Marc Schechter discusses managing client requests and the evolving role of financial advisors for high-net-worth individuals. “Your clients become your friends and you want to help your friends,” he added, “and most of the time we find ways to help their situation.” Read more

Schwab Network Interviews Aaron Hodari About Alternative Investments: Schwab Network Interviews Aaron Hodari, CFP®, CIMA®, Managing Director and CIO of Schechter Investment Advisors. Aaron discussed the recent innovation of alternative investments, the benefits of aSchwab Network Interviews Aaron Hodari, CFP®, CIMA®, Managing Director and CIO of Schechter Investment Advisors. Aaron discussed the recent innovation of alternative investments, the benefits of a diversified portfolio, and offered insights into private credit and private equity. Read more diversified portfolio, and offered insights into private credit and private equity. Read more

Financial Advisor Magazine Interviews Marc Schechter on Retaining the Next Generation of Clients: Financial Advisor Magazine interviewed Marc Schechter about cultivating relationships with the next generation for long-term success in wealth management.  "We treat the next generation as clients before they actually are." This proactive approach not only strengthens client loyalty but also ensures a smooth transition of wealth within families. Read more

Schechter Personal

The Schechter team recently had the opportunity to gather in-person for teambuilding and strengthening relationships at Marc Schechter's family home, Casa Familia, in Punta Mita, Mexico. Thank you, Marc, for hosting us!