If you're feeling frustrated with the unpredictability of the stock market and unsure about the impact of potential interest rate cuts, then you are not alone! It's like trying to predict the outcome of the NCAA national championship with constantly changing rules and players.

In this episode:

• Engage with the March Madness excitement as the hosts share their NCAA basketball tournament picks and potential upsets for an exciting tournament experience.
• Understand the impact of interest rates on stock market trends to make informed investment decisions.
• Gain insights into tax-beneficial savings before the tax deadline.

First Quarter Review and Second Quarter Outlook

Follow along as Jon, Cody, and Sean reflect on financial performance in the first quarter of 2024. Find out what they found surprising and not so surprising, and their outlook for the second quarter. Find out why the Magnificient Seven is now the Fab Four as well as the advisor's grounded expectations, inflation moves, real estate outlook, and expected interest rate decreases in the near term.

Relevant Resources:

https://www.wsj.com/finance/stocks/the-stock-markets-magnificent-seven-is-now-the-fab-four-2dff87ac?mod=hp_lead_pos1

https://www.msn.com/en-us/money/markets/the-stock-market-had-a-great-start-to-the-year-what-history-says-happens-next/ar-BB1kJbRv?ocid=windirect&cvid=fdc025a7257b4483ac6383573093f1e5&ei=12

Important Disclosures

*Morton Brown is neither a law firm nor a certified public accounting firm. No presentation, post, or portion of any podcast content should be construed as legal or accounting advice.

Connect with Your Hosts:

Cody Demmel on LinkedIn

Sean Roth on LinkedIn

Jon Kerstetter on LinkedIn

Welcome to coachable wealth, where we blend the worlds of sports and finance to bring you strategies as you navigate your wealth building journey. John, Cody, and Shawn are here to help you elevate your financial advisor relationship to meet your long term goals. Now, let's get to it. I went for a long, nice hike yesterday on Easter, spent some time with, with family. Was, it was a good weekend.

Yeah, I also, we got out on Saturday and hit up the local rail trail here, and I think we ended up doing almost 8 miles. I mean, you get out and you start walking, before you know it, you're like, hey, we're like 4 miles. We gotta head back over a two hour trot, I think. Yeah, same. I did some time on the trail running and biking, and then I played the most relaxing sport known to man of golf.

It is relaxing sometimes. Other times it's very frustrating. But I feel like you played in scramble this weekend, right, Sean? Yeah. So the pressure is off.

My first round of the year, it's just my, the first hole since basically September was over a lake. And I think three out of four of us were in the water and I was. And that was five minutes into the whole thing. Yeah, that's, that's the one thing, one bad thing about scrambles, when they do like that shotgun start and you never know what you're gonna start at. Yeah.

Starting on a par three that's over water isn't ideal. It's my first shot in six months. That's a long par three on that course, too, isn't it? Like 190 yards or close? Yeah, almost.

Yeah, close to 200. Yeah. Is that the 18th? Yeah. Yeah, it is.

Long. Did you have any consistencies, strong off the tee or short game or consistency? Absolutely not. I think I hit some of the best shots of my life, followed by some of the most what are you doing? Moments, but there were a few I got ahold of, so I was happy about that.

Nice. Were you guys able to watch any basketball or baseball over the weekend? Yeah, I watched quite a bit of march madness. Unfortunately, my, my predictions are completely busted. Me, too.

I had North Carolina winning it, and they lost in a close one to Alabama Thursday night. So I'm kind of just watching it now for, for upsets to happen. Yep. I'm the same way I had Houston winning at all. So whenever their best player got hurt halfway through the first half of the game, I knew it wasn't going to be a good finish.

So they lost to Duke there, unfortunately. Yeah. I spent some time watching some March madness. Love to see NC State, you know, underdog pulling through and I think, I don't know why, but just Duke is one of those teams. He just hard for me to root for.

Maybe because they're so good every year. Then also watch the Phillies off to a typical Philadelphia Philly hot start this season. Yeah, real hot. Especially Friday and Saturday. Those, those were, those were great games for the Phillies.

Yeah. They kind of walked into game one and two with all this preseason hype and I don't know if you guys saw it. I think it was mlb.com. They ranked the Phillies to have the best bullpen and then they absolutely imploded in game one on Friday. Oh yeah.

Especially Wheeler pitched it a gem in game one. Obviously it's tough to start the season going against the Braves, who you can make the argument that they're, you know, one of the top two teams with the Dodgers. I mean the Orioles are really good too, but the Braves just have so much firepower and their, their offense and their pitching is really good too. So obviously it's a tough, you know, three game start to the schedule, but at least they were able to pull out one on Sunday. Especially cause that was a come, come from behind one too.

Yeah, there's the Braves. I mean basically one through eight. I mean there's, there's no reprieve. Everybody can hit. Yeah, I know, it's, it's crazy.

Yeah. It was good to see the Philly fans giving strider some, some of the hometown treatment in the, in the bullpen before the game a little bit. I saw that and then they were chanting almost the entire game to like what they did in the NLDS last year. Yeah, he is crazy good. I know he let up some runs, but what do you have like eight or nine strikeouts on, on Friday?

Yeah, I mean the Phillies were winning going in like you said, john, into the 7th or 8th inning and the bullpen just completely blew it. I tell you what, those Saturday, I mean you got to give the fans credit. That almost felt like on tv, like a playoff atmosphere. Yeah. Game two of the season.

Yeah. Unfortunately they get, they ended up getting destroyed. But at least they came back on Sunday and pulled out the win. Ranger looked pretty good. The first thing he was a little bit of a struggle.

He let up a two run home run, but then he settled in and pitched really well. Yeah. Hopefully. I don't know, just looking ahead here in the schedule. I mean the Phillies have a chance to really jump out strong here if they can put it together for the month of April.

I mean they got a pretty reasonable schedule. That would be a nice surprise compared to what the last couple years have, have been. What were they like ten games under 500 last year at the end of April or May which month it was. But they were so far they were like almost 20 games back from the Braves. Yeah I was going to say I feel like by June they were like 15 games out of the Nleast or something like that.

Yeah. Like you're not going to catch up from, from that that much down. But obviously baseball is a very long season so hopefully they can start heading and getting the team back on track. I feel like, I know Sean you can probably speak to it just like football, I mean where every game really counts. I mean, high school, what are you talking?

Ten game season NFL 1718 game regular season. College football where we at twelve games now and then you got the major league baseball 162 games. I mean man that is such a long season. That is a marathon. You know football is a little different.

You get one a week. So when you win or lose one it really sticks with you for you know, six days whereas baseball, I mean you're, you're on a plane the next day and right back at it. So I don't think you can let a win or a loss really eat at you in baseball because you got to get right back out there. Yeah. And I think, you know the last couple years we, we at least in this area have just grown accustomed to, well this is how the Phillies start, you know, let's see how we're doing in September.

Yeah, when they get hot. But it would be nice for them to start, you know, start strong and not have to play catch up especially when the Braves who probably have the second best lineup on paper in baseball behind the Dodgers are in the same division. I mean the Braves are actually, they've never beat the Phillies in a, a postseason series, believe it or not. But you got to figure, you know, how long can you keep that up? You know, it's not going to be something that lasts forever.

So it would be nice to win a division here. How many years in a row did the Braves win that analyst? Oh, they were, they were in the teens there. I mean is that streak still going? Like, when was the last time another team won the NLE?

Might be like ten straight since the Phillies had control in the two thousands. I feel like when the nationals won the World Series I think they were a wild card. I think they were one of those teams that got super hot at the end of the season and just kind of rode that wave through the playoffs. It looks like the last Nationals won in 2017. Ever since 2017, the Braves have won every single year.

I think back in the heyday, like when the Braves had like Maddox and Glavin, I mean, I feel like they won like 14 in a row or something like that. From 95 to 2005. Yeah, ten straight. And then the Phillies took control and won for five years. And then it was kind of back and forth between national Braves Mets.

It's honestly crazy how good the Braves have been for, for so long and that you can make the argument this is their best team. Like, their pitching is even better now. Yeah. Especially if course sale stays, stays healthy. Kind of going back to what, what Sean was saying about football, you have like a, at least a week or sometimes two week if you have a bye week before your next game compared to baseball, where you most likely are playing the next day, would you think of that as a positive or potentially a negative from a coaching and a player standpoint?

I look at it as a positive. There is nothing worse than, you know, as a player when you feel or a coach, you know, maybe you made the wrong call or you didn't make the play, you dropped the pass and you have to wait a whole week to go out and do it again. Obviously you practice, but it's not the same when you play 162 games. I'm sure that that part of it is good the next day. It's like once the first pitch goes off, I'm sure you forget all about it.

You're just locked in. Yeah. Yeah. I think of it as a positive, too, unless you're in a very bad slump, which happens in baseball. So if you think of like Turner last year to start the season was playing awful compared to his standards, and then obviously he turned it around after the Philly fans did something completely different compared to normal, where normally they would have booed them.

They gave him a standing ovation and seemed to turn around. But I do think it's probably more of a positive. Unless you're in a slump like that, then you can, it probably really gets into your head that, oh, man, here's another game that potentially going to struggle depending on how their mental game is. I remember thinking back to the Phillies last year when we were just talking about how they just kind of started out in a massive slump for the first couple months. And I remember just watching the postgame press conferences and the Phillies manager, every game he's like, yeah, we're going to get out of this.

We're going to get out of this. We just need the reps. And almost, it was almost rinse and repeat every day. He's kept saying the same thing, but I mean, eventually, after the all star break, they did bounce out of it. So I think it is a positive that you can play every day and kind of again, get those reps, consistency, and you'll eventually bounce out of it.

Keep doing the right things. I mean, I've never played baseball at that high of a level, but. But I'd imagine that you're not even close to your peak form at this point in the season. Oh, yeah. Spring training seems like it just flies by.

Yeah, I heard. I think it was Mike Schmidt yesterday during the broadcast of the game. He said the most injuries can occur within the two weeks, the first two weeks of the season, just because kind of what you guys were saying, the players really aren't fully ramped up, the pitchers aren't stretched out, and this is kind of when a lot of the injuries occur. Oh, yeah. Especially when you have a player like carpet diving over the railing in the second game of the season.

But now, hopefully the Phillies finally get off to a good start this year. It was a tough three games to start the season against the Braves, but hopefully they get off to a good start. So we are officially in a new quarter going forward into 2024. Do you guys have any specific thoughts on the first quarter of 2024, whether it's regarding the planning side, anything on inflation, any specific headlines or thoughts that come top of mind to you guys? Yeah.

So I could talk about one, how obviously the first quarter was great for the stock market going back to 1950. Of the 16 times, the stock market was up in the first quarter over 8%. 15 of those 16 times, the stock market had another 9% to add on to it. So only one time did the market end lower when it had a first quarter of 8% or higher, which I thought was pretty interesting going back to 19. Yeah, I mean, hopefully that that's a good outlook going forward.

And I know we were talking about it a little bit earlier today before we started the podcast, but it would almost be a little healthy to have a little bit of a sell off here in the stock market. Not a huge sell off or anything, but being up 10% in the quarter isn't exactly normal, especially with how positive the returns were last year in 2023. So if you continue at the 10% place, the S and P 500, that's a 40% return for the year. So I don't think anybody is projecting that going forward. So it is, you know, good to bring it back to what your expectations should be going forward, too.

Yeah, I think, too. Just we're starting to see a little bit broadening of the stock market. I mean, we kind of finished year end and went in the q one of 2024. Everyone's talking about the magnificent seven. I know.

That's kind of fizzled out a little bit. I think they're now calling it what? The magnificent four, I believe. Fab four. Fab four?

Yeah. Back into March madness. Yeah, I guess Apple, Tesla and what Alphabet are struggling a little bit. They're lagging, but Nvidia, meta, Microsoft, Amazon, they're still pushing along pretty strongly. Tesla's actually down almost 30% so far year to date, and they're still off almost 50% from their all time highs.

Apple's down almost double digits to start the year. Google is up 8% year to date, but that's lower than 10% of the S and P 500. So you were saying, John, it's good to see it broadening out from the stock market. And it's not just the S and P 500. So we have international stocks up over 5%, small cap stocks up over 5%, emerging markets up two to 3%.

So if you project those returns out for the whole year, you're looking at well over double digit returns. I saw something, too. They're talking about the average person who's contributing to a 401k if it's bi monthly contributions from their payroll. They said like 75% of those dollars are going into some form of large cap holding. Wow.

Which is kind of funneling into that magnificent seven. I mean, the apples, the Microsoft's. But to your point, Cody, I think that broadening of the market is, is a great outlook looking forward. Yeah, I think tying it back to baseball. How long did people have to wait for internationals start holding up their end of the bargain?

It seemed like a lot of years, a lot of people were high on international, just seemed to never pan out. Then all of a sudden you have Japan having a record year. Yep. Right. Yeah.

It'll be interesting to see. There was a big inflation number on Friday. Even with the stock market close, there was still a big core PCE reading on Friday, which the Fed says that's the number that they look at the most because that strips out energy and food prices. So it was good to see that continue to come down. So it was 2.9% last month.

For this month, it's 2.8% year over year. So still above their 2% target. But if we just look back to this time in last year, in 2023, it was almost 5%. So now being down to 2.8%, it's good to see inflation continue to fall. I don't know.

Grocery store prices are still pretty inflated. I mean, I don't think we'll ever see deflation, but it's good to see that the inflation is slowing down. Right. And it looks like, I guess, the housing sector. I mean, just if you're in the market for a new house, I mean, it's still pretty, pretty rough out there.

Yeah. The fair market values interest rates. I mean, it's still not the opportune time to buy a new property now. It'll be interesting to see, I know the Fed said, was it last week or a couple of weeks ago that obviously they didn't cut interest rates in March, but they're potentially looking at three cuts this year. So it'll be interesting to see what the mortgage rates do whenever they finally start cutting interest rates.

I think a lot of that has to do with location. I mean, it's just, there is no availability around the Lehigh Valley at all. There's a ton of people looking to move, and I think a lot of it has to do with. You still have people wanting to move out of cities or maybe across the river to pay some less taxes from New Jersey, I wonder. Not that we're in an area, but I would love to know what the real estate market is like in some smaller, you know, maybe more rural areas of the state and see if it's still like that, because it's insane.

Yeah, it seems like when a house goes up for sale, it's selling within a week or two. They said the average. I was at a real estate conference the other week, the average time on market is 20 days, which means you got a lot of homes that are going in probably ten days, and probably a few that are real fixer uppers that are taking a month or so to sell. If no house went on the market at all, there'd only be two to three weeks supply of houses left. And like a good real estate market, when homes are affordable, interest rates are good.

You're looking at a two to three month, you know, window of homes available if no more houses went on sale. Wow. Yeah. If no house went on sale, every house would be gone in two weeks. That's.

That's crazy. Wow. So going into the second quarter, are there any particular things that come to mind for whether it's on the planning side or, or the investing side? I think you said it a little bit ago, Cody, just potential with the Fed cutting rates up to three times this year, which could be what, 75 bps potentially. I know it's not a huge number, but do you think just that reduction in the interest rates say there's still a lot of cash sitting out there in the sidelines in money markets or savings accounts potentially getting up to the 5%?

Yeah. Do you think when they do cut it, if they do do it three times, that's a good discussion for people to, hey, maybe potentially take some of that cash and move it into the market? Yeah, I mean, honestly, I think you should be doing that now before cutting because whenever they, they do cut, the first, you know, interest rate that's going to drop is the money market. And potentially you're not going to get the principal increase that you would, or you definitely won't get the principal increase on money markets. But if you're investing in bonds, you're locking in the duration.

So how long the bonds have till they mature and also the interest rate that they're paying right now. And if, when the Fed does cut interest rates, you'll still get around that same yield, but potentially a principal increase, which means a price appreciation on the bond. So if you have money that you're not looking to use within the next six to twelve months, you should definitely be talking to your financial advisor about what do you do with these assets? And if you want to be more conservative with it, now is a really good time to start looking at fixed income, whether it's, you know, inside of an IRA and doing corporate bonds or if it's in a brokerage account and looking at municipal bonds, depending on what your tax bracket's at on a planning side, just with tax day approaching here, I know we're at April 1 and we're about two and a half, three weeks from the tax deadline. I mean, if you haven't, you can still contribute to your traditional iras or Roth IRAs.

I mean, it's a good time to do that too, to have a conversation with your advisor. If you have not done that, you still have a little bit of time to get that completed. Yeah, good point. Good point. Anything top of mind for you, Sean, going into second quarter, so same as you guys.

I'm really interested to see if the Fed is going to stick with their word. It seems like they haven't always in the past or they've maybe delayed when they were going to start lowering interest rates. I know, in 2022, people probably thought, oh, well, in 2023, at the end of the year, they're going to start lowering interest rates. And now we're second quarter of 24 and they're talking about doing it three times by the end of the year. Well, is that going to happen the second quarter?

Are there going to be three rate cuts at the end of the year? Interesting to see, but I think you're right, Cody. Now is the time, I believe, to get into bonds so you can get that premium increase that you won't see in a money market. Yeah, I mean, I think to start this year, there were a lot of people who thought there was going to be at least four to five cuts. If you look at just the ten year treasury, which is a big standard for what the bond market thinks the Fed is going to do.

To start this year, the ten year treasury was at 3.85%. Now it's all the way up to 4.25. And that's just from the market pricing. And if the Fed isn't going to cut near as much as they thought, I think one important thing to point out to, whether it's clients or people who don't follow the bond market that much, is even though the ten year treasury went from 3.8 to 4.2, normally that move would mean you would have a loss in bonds if you already bought the bonds. But since we started at a much higher yield on fixed income, even though we've had a rise in interest rates inside the bond market, fixed income is flat for the year.

So when you think about the complete opposite of that, when the Fed does start cutting interest rates, you're locking in that yield that you're getting on fixed income, and you'll potentially see a actual price appreciation on the bonds. So people that are close to retirement or don't want to take on as much risk, this is a really good time for them to start looking at the fixed income market. And I guess the other story just kind of looking, if they do continue and talk about cutting the rates, is, I guess in the small cap space, I mean, just because lending credit right now, obviously they're looking out pretty long on the duration scale. I mean, if they do start to cut rates a little bit, they're going to be able to access some cash at a lesser rate. So, I mean, that's going to help out small caps going forward, too.

Yeah. Yeah. It'll be interesting to see, whenever they do start cutting interest rates, what, what that does to the different sectors inside the stock market I do think it is interesting to point out, and I know we touched briefly on international, but since the lows in 2022, international has actually outperformed the S and P 500. And I think that's often overlooked from a lot of investors. Tech stocks are up the most, but then international is actually, on a whole, outperforming the s and P 500 from the lows in 2022.

I've seen some, some quarter one, like 2024 numbers here, and they're just looking at, like the last decade of S and P 500. I mean, I think from what, 2014 to 2023, it was up like over 200%. Yeah. I mean, just some of the returns are astronomical. Looking at, like an average of a 20% annual return.

And that's with all the huge declines that we saw in 20. I mean, 2020 was the fastest bear market ever. We went down 30% in pretty much one month, and we rebounded quick. And then 2022 was just really dragged out. Pretty much a complete wash for all of equities and even fixed income, too.

Right. So I guess before the next time we. We do our podcast, we'll be at towards the national championship for. For March Madness. Who are you guys rooting for?

Who do you think Will. Will win? As I said, I would love to see the upset just because my kind of, my original predictions are out, but I'm going to go with the number one seeds. I think we're going to see Purdue, UConn, and then who do you think is going to win? I think Uconn.

I don't see anybody being them after their, their 300 run they had after halftime the other night. I saw that they've. They've led every single game in March madness by at least 30 points. That is just crazy. So the other night they were, I think it was like 25 23 heading in the halftime.

Yep. And literally I turned it on like five minutes into the second, and they were up almost 30 points. And they wanted a 30 run. Yeah. Insane.

I'm the same way. I would love to see somehow Nc State pull up pulling up set, or even Alabama pulling up set over Yukon. But I do think it's gonna be yukon winning it all, probably over Purdue. I know big guy for North Carolina State is playing really well, but I think he's going to have a different struggle when he goes against Edie for. For Purdue.

DJ Burns. Yeah, yeah. I'll be the. I'll be the ally. I've already picked indiana State, who didn't even make the tournament, so I'll pick.

I got UConn and NC State and then UConn winning. Or NC State pulling off the huge upset and beating UConn. No, I don't think anyone's touching uConn. Yeah, I think yukon, it's gonna win at all. Also, big, big Jimmy B.

Fan. So it's good to see NC State back for the first time since Jimmy Vallis. That's pretty cool. What, 1986? 86.

The year after Villanova won. Yeah. Okay. Oh, yeah, we touched on that in our last podcast, how there was. There's been no seed above an eight seed to win at all.

Maybe NC State will. We'll change that. What are they? An eleven seed? Yep.

Yeah. Yep. That would be two, one's, a four and an eleven. Yeah. Until next time, we hope you enjoyed this episode of Coachable wealth, brought to you by Morton Brown family Wealth, an SEC registered investment advisor.

This podcast is designed for educational and informational purposes and not intended as investment advice. More information can be found at www.mortonbrownfw.com.com.