Greetings!
Welcome to this week’s edition of Advice for the Good Life: Your Pathway to Wealth and Wellness.
After a remarkable run for stocks this year, investors were recently reminded that markets rarely move in a straight line. In this week’s Wealth Advisory, we’ll explore the forces behind the latest bout of volatility, including renewed interest-rate concerns, geopolitical uncertainty, and what history teaches us about navigating Fed policy shifts without losing sight of long-term goals. As always, perspective matters more than prediction.
In Wellness Navigator, Christine Despres offers an encouraging and practical look at one of the most important health topics of our time: dementia prevention. Drawing on the latest research, she highlights fourteen modifiable risk factors associated with cognitive decline and reminds us that many of the most powerful steps we can take for our brains are also among the most beneficial for our overall health and longevity.
Together, these articles share a common theme: preparing today for a better tomorrow. Whether we’re managing a portfolio, protecting our cognitive health, or simply making wise choices with the gifts we’ve been given, the future is often shaped by small, consistent actions taken over time.
On a personal note, this will be the last edition for the next two weeks. My family and I will be traveling to North Carolina to celebrate the wedding of our youngest daughter, a milestone that fills us with gratitude and joy. I look forward to reconnecting with you when we return.
As always, thank you for reading. If you find value in this newsletter, please enjoy it, share it with family and friends, and encourage others to subscribe.
Until next time,
Jon Goodman, CPWA®
JCG Advisory Partners, LLC
Helping high earners and private clients turn income into assets, and assets into optionality.
Wealth Advisory: Understanding What Is Driving Recent Market Volatility
Following a period of historically strong stock market returns over the past quarter, the latest bout of volatility has understandably prompted questions from investors. The Nasdaq recorded its steepest single-day decline in a year, falling 4.2% on Friday, June 5.
Somewhat counterintuitively, the drop came in response to a strong jobs report. While positive economic news is generally welcome, it heightened the possibility of a Federal Reserve rate hike before year-end.1 Adding to investor unease, a brief re-escalation of tensions in the Middle East brought geopolitical concerns back into focus. Market swings are a normal part of investing, and this recent episode has identifiable causes that historical context can help clarify.
Just as architects design structures to endure all weather conditions rather than only fair skies, investors benefit from maintaining sound risk management and portfolio balance even during periods of strong performance. Appreciating market gains is important, but it is precisely during favorable periods that investors are best positioned to prepare for whatever conditions may follow.
Even accounting for the recent single-day pullback, major market indices have still posted healthy gains so far this year. History also suggests there is no need to overreact to the prospect of Fed rate hikes. Short-term volatility can occur as markets anticipate tighter financial conditions, but equities have performed well across many different rate hike cycles. Understanding how interest rates influence markets, and keeping these moves in perspective, can help investors remain focused on their long-term objectives.
The market has seen a return of volatility
Major indices, including the S&P 500, Dow Jones Industrial Average, and the Nasdaq, have gained momentum in recent months. Part of this strength can be characterized as a “relief rally.” The conflict in the Middle East, for instance, has had a smaller economic impact than many initially anticipated, even with elevated oil prices. Corporate earnings have remained robust, and growing excitement surrounding an upcoming wave of initial public offerings has also contributed to positive sentiment.
Notably, the bond market has faced a more challenging backdrop, as interest rates have stayed elevated. Yields have risen across the entire yield curve this year, with the 10-year Treasury yield, for example, hovering around 4.5%.2 The bond market is sometimes referred to as the “smart money,” reflecting the view that bond investors tend to analyze underlying trends in inflation, growth, and Fed policy more closely than equity market participants.
Regardless of whether this characterization holds, the bond market has been signaling that rates could remain higher for longer than some had hoped, even as stocks rallied. It is therefore not surprising that equities eventually reacted to the same underlying dynamics. This has been especially true for technology and artificial intelligence-related stocks, which tend to be highly sensitive to changes in interest rates.
Technology stocks tend to be highly sensitive to interest rate movements
The Magnificent 7, a group of large technology companies, offers a clear illustration of this sensitivity. From their peak at the end of 2021 to their trough in late 2022, a period when inflation was accelerating and interest rates surged, this group lost roughly half of its value.3 The impact was felt across the Nasdaq as well as broad sectors such as Information Technology and Communication Services. These groups subsequently began to recover as rates stabilized and the Fed reduced its pace of hikes, eventually rallying to new highs.
The reason technology stocks are sensitive to interest rates comes down to how investors value them. These stocks are purchased largely on the expectation of high growth extending well into the future, which differs from more established businesses that generate steady, near-term cash flows. Because interest rates determine how future profits are discounted to their present value, even modest shifts in rate expectations, particularly when they reverse direction, can produce significant price swings. In this sense, interest rates act like a long lever, where a small move at one end can produce a large effect at the other.
This dynamic carries particular weight today because technology-related stocks now represent a larger share of the overall market. The Magnificent 7, for instance, accounts for approximately one-third of the S&P 500.4 As a result, many investors may hold a greater concentration in these companies than they did in the past. The chart above shows that, despite the recent pullback, these sectors have still delivered strong performance this year. Even so, investors may encounter periods of volatility that would have been less common in the past, reinforcing why monitoring asset allocations and maintaining portfolio balance is just as important during rising markets as it is during periods of decline.
Equity markets have delivered solid returns across Fed rate hike cycles
It is worth keeping in mind that expectations for Fed policy can shift quickly as economic conditions evolve. Earlier this year, the prevailing view was that the Fed would continue cutting rates. Those expectations changed rapidly as energy prices rose and the labor market strengthened, as illustrated in the chart above. This serves as a reminder that the Fed often responds to economic developments rather than directing them.
There is also some uncertainty regarding how Kevin Warsh, as the new Fed chair, will approach inflation. He has historically been viewed as an inflation hawk, suggesting a preference for raising rates to help stabilize prices for consumers and businesses. This stance could put him at odds with the White House’s preference for rate cuts. He has also publicly indicated that the Fed should reduce its balance sheet, a move that would effectively tighten financial conditions.
All of this, however, remains speculative until the Fed makes its decisions based on actual economic conditions. It is also unclear at this stage whether any tightening would mark the beginning of a full rate hike cycle or simply a brief period of elevated rates.
That said, even if current market expectations prove accurate, the Fed is not anticipated to raise rates until late in the year, and only by 25 basis points, as shown in the chart above. This would be a modest adjustment by historical standards, particularly when compared to the 2022 to 2023 rate hike cycle, during which the Fed raised rates from the zero lower bound to 5.25% over the course of 11 hikes.
More broadly, equities have performed well across a wide range of rate environments, including those in which rates were rising. This is especially true when the Fed tightens policy in response to a strong economy, since healthy growth tends to support corporate earnings. In other words, rising markets and rising rates are not mutually exclusive and have coexisted throughout history.
The bottom line? Recent volatility reflects the possibility of Fed rate hikes and renewed geopolitical tensions, but neither development is a reason to fundamentally alter long-term plans. While certain parts of the stock market may experience short-term turbulence, history demonstrates that markets can perform well across many different rate cycles.
References
- https://www.cmegroup.com/markets/interest-rates/cme-fedwatch-tool.html
- https://home.treasury.gov/policy-issues/financing-the-government/interest-rate-statistics
- The Magnificent 7 includes Apple, Microsoft, Nvidia, Amazon, Alphabet, Meta, and Tesla. The peak from 2021 to 2022 occurred on November 19, 2021, and the trough occurred on December 27, 2022.
- Clearnomics research based on Standard & Poor’s data
- https://www.wsj.com/opinion/the-high-cost-of-the-feds-mission-creep-role-responsibility-monetary-policy-economy-20a352f8
- https://www.federalreserve.gov/monetarypolicy/fomccalendars.htm#32979
Wellness Navigator and Holistic Brain Health Coach, Christine Despres, RN, NBC-HWC, CDP
Proactive Steps to Protect Yourself Against Dementia
Today, what to actually do about cognitive decline before it ever starts.
More than 55 million people worldwide are living with dementia. In 2024, the Lancet Commission found that up to nearly half of all cases could be prevented or delayed by addressing fourteen modifiable risk factors.
Fourteen things. That is the map.
This is not luck or genetics. The science is strong and it points in a far more hopeful direction than we realize.The power to age well is in your control.
The 14 modifiable risk factors:
- Less education in early life (new learning lives here)
- Hearing loss
- Vision loss
- Depression
- Social isolation
- Physical inactivity
- Traumatic brain injury
- High blood pressure
- Obesity
- Diabetes
- High LDL cholesterol
- Smoking
- Excessive alcohol
- Air pollution
Most of these are midlife factors. The years where they do the most damage are happening to you right now.
This is not a list to wait on.
Most of these are familiar. Most are addressable without overhauling your life. Hearing aids when you need them. Cholesterol and blood pressure are treated like the brain investments they are. A regular walk. Sleep that does its job. The right relationships.
You do not have to do all fourteen. Pick the ones that matter most for where you are and start there. One area at a time until it’s your lifestyle.
Almost half of cognitive decline lives inside this list. Almost half of it is in your hands.
And here is the bonus no one talks about. It is not only about your brain. It is your metabolism, metabolic health and cardiac health. Heart, gut, hormones, blood sugar, mood, stress all live here.
Work these and everything improves. The body works as a whole and so does the strategy.
This is the work I do every day in my coaching practice. We take the fourteen, line them up against your life and figure out where the next move matters most.
The women who make real progress stopped trying to figure it out alone.
Let’s get to work.
With compassion,
Christine
The Wellness Navigator | Holistic Brain Health Coach | RN, NBC-HWC, CDP
https://www.thewellnessnavigator.com/
P.S. 👉 Book a free Brain Health Strategy Session here: Click Here to Schedule Your 30 minute Strategy Call