We are officially halfway through 2024. 🎉

To celebrate, in today's email, I'm sharing some updates and commentary on:

• The State of Consumers
• The State of Companies
• The State of Investing

I'm also sharing two reasons investors should remain optimistic.

Let's dive in. 👇

The State of Consumers

1. Household Net Worth Is at All-Time Highs

After rising by more than $12 trillion in 2023, household net worth growth continued its torrid pace in the first quarter of 2024 (this is the most recent data), rising by another $5 trillion.

The majority of that increase ($3.8 trillion) was attributed to stock market performance. Given the positive market returns we experienced in Q2, we'll likely see another notable increase in net worth when second-quarter data is officially released.

2. Consumers Have a Mountain of Cash

At the end of 2019, the total balance of money market funds and checking accounts owned by consumers was ~$4.5 trillion. Today, that amount stands at roughly $10 trillion ($6 trillion in money markets and $4 trillion in checking accounts).

Considering that the U.S.'s annual GDP is about $25 trillion, consumers have a mountain of cash that could potentially act as a buffer when hard times return.

3. Compensation & Disposable Income Are Up Significantly

One reason that net worth and cash have spiked to new records might be that employee compensation and disposable income have comfortably outpaced inflation since 2020.

Importantly, it's not just high-earners who have benefited, as non-manager incomes have significantly outpaced managerial wage gains during this same period.

This is not to say that everything is perfect for everyone, but it's hard to argue that the average consumer isn't doing pretty well these days.

The State of Companies

1. Buybacks Are Popular Again

After a brief pullback in corporations buying back their stock, they are at it again, with buybacks expected to exceed $900 billion this year and cross the $1 trillion threshold for the first time ever in 2025!

This is a good thing for long-term shareholders like us since buybacks generally increase our percentage ownership in each respective company without us needing to do anything at all.

» Learn more about the benefits of Stock Buybacks (a.k.a. Flexible Dividends)​

2. Earnings Continue to Rise

The stock market is often called a "leading indicator." This means the market typically rises before good news is evident and falls before bad news is apparent.

For those wondering why the market's recent performance has been so strong, it's likely because earnings have been rising, and expectations are that this trend will continue. In fact, it's now estimated that earnings will grow by 11% in 2024 and 14% in 2025.

The State of Investing

1. The Biggest News Remains What Has Not Happened (Yet)

As 2023 came to a close, the Fed expected to cut rates three times in 2024. We're now past the halfway point, and we've had exactly zero rate cuts thus far, with the Fed citing the strong economy and “persistent inflation” as reasons for staying put.

As it stands today, the Fed has reduced its expectation to just one cut this year. When it comes to forecasting the Fed, countless people will offer their opinions, but I've long said that not even the Fed knows what the Fed is going to do.

2. The Popular Doomsday Crystal Ball Appears to Be Broken

The inverted yield curve is widely considered the ultimate recession prediction tool. An inversion occurs when the 2-year Treasury rate is higher than the 10-year Treasury rate.

In a normal market, it shouldn't be that way, and it has historically "signaled" pending doom for the economy and the stock market.

Well, it's been continuously inverted for two years now (the longest inversion ever), and yet, the economy and the stock market have done incredibly well. Thus, we should exercise caution when using any "indicator" to predict the future.

» Learn more about Yield Curve Inversions and What They Mean for Retirement Investors​

3. Performance & Valuation Gaps

Since the Great Financial Crisis, large-cap growth stocks have provided much of the return within diversified portfolios. This 15-year performance gap has led to historic valuation discounts in international stocks, small caps, and value stocks, creating potential opportunities for long-term investors.

Given the cyclical nature of investing, the best way to participate in future gains in all areas of the global markets is to continue owning our diversified portfolios in perpetuity.

4. This Has Been a Run of the Mill Bull Market

As good as the market's recent performance has been, it's been pretty average compared to other bull markets. As it stands, this bull market cycle (starting late in 2022) is now 20 months old and has produced a 53% gain.

By comparison, the median bull market over the last century lasted for 30 months and produced a 90% gain. That's not to say today's market will keep rising, but that we have a ways to go until it's just an average bull market.

Two Reasons for Optimism

1. Clean Energy Is Gaining a New Lifeline

For years, many of the world's foremost energy experts have said nuclear power is the most reliable short-term path to zero-emission energy.

Now, two of the world's wealthiest people (Bill Gates and Warren Buffett) are funding a nuclear start-up that aims to make nuclear power safer and less controversial by developing an entirely new type of reactor.

Given what’s at stake here, it's probably not a matter of if but when we'll get to zero-emission energy. The future is indeed bright.

2. Stopping the Spread of Cancer May Soon Be a Reality

A team of researchers at Massachusetts General has identified the specific gene that allows cancers to spread from the primary tumor to other parts of the body—which accounts for nearly 90% of cancer-related deaths.

Now that the gene has been identified, researchers will learn how to "silence" the gene, which could prevent cancer from spreading throughout the body. Human progress is often quiet but inevitable!

Bottom Line

I hope you'll agree that there is much to be optimistic about.

That said—and regardless of my general optimism—nothing can tell us what will happen next in the market.

This isn't so much an admission of my personal inability as it is an enduring truth.

Nobody knows.

While that's true, what we do know is that history has repeatedly shown that humanity has a knack for solving huge problems that appear overwhelming (or impossible).

As good as solving these problems is for humanity in general, this innate human desire for more and better will ultimately drive the markets over the decades ahead...just as it always has.

Not surprisingly, this is where I believe we should place our focus rather than the "breaking news" of the day.

Stay wealthy,

Taylor Schulte, CFP®