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  • John M West III, MBA, CFP®


Large-cap growth stocks had a strong second quarter, pushing the S&P 500 to new highs. The rest of the equity markets have lagged significantly. The leadership continues to be very narrow. Bonds have continued to lag, but as anticipation of Fed rate cuts has moved forward, the subsequent price appreciation is getting closer. Small-cap, mid-cap, and foreign stocks pulled back during the quarter but still had strong 1-year numbers.

As a reminder, the index returns above should only be used as a very broad point of reference.

Cash & Fixed Income: Cash led for the quarter, YTD, and 3 years, while high-yield bonds led for the past 1, 5, 10, and 15 years. Municipal bonds were the laggard for the quarter, while aggregate bonds were the worst performer YTD, 1, 3, 5, and 10 years, and cash was the worst performer for the past 15 years.

Bond yields remain in the 5% - 7% range while money market is still paying over 5% annualized. Money market yields will go down when the Fed ultimately begins to cut interest rates, but we will continue to take advantage while it lasts. Strong bond yields also continue to support a more sustainable environment that provides diversification from stocks.

EquitiesLarge U.S. stocks outperformed all equity categories for all periods. Mid-cap was the worst performer for the quarter, while small-cap was the worst performer YTD and for the past 1 and 3 years, and foreign stocks were the laggard for the past 5, 10, and 15 years. Overall, equities have had a very strong 12 months.

There is no question that technology continues to be more and more entrenched in our everyday lives, but as an investment, it is very expensive and speculative.  We continue to earn strong yields in bonds and cash while large-cap equities are at or near all-time highs.

We feel that the equity returns will broaden back into other stock categories as rate cuts move through the economy. As a result, we are slightly overweight equity and continue to believe this environment supports a diversified portfolio that will provide the best risk-adjusted returns to achieve your long-term retirement goals. As always, we are here and would love to discuss any changes to your short and long-term goals.

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