June’s “First Friday” meeting discussed the prevalence of illusions.  Illusions combined with clever narratives frequently charm the best of us.  And when you mix market appreciation with narratives focusing solely on the positives, realities surrender to perceptions. 

Over the course of history, prosperity has discouraged demanding work.  Lax behavior goes unpunished.  Eventually this behavior leads to the downfall of every great civilization.i  And while this discussion is not insinuating America’s decline, it focuses on the “recency-bias” created by prosperity, and the lack of due diligence and critical thinking prosperity encourages.

May’s “First Friday” meeting focused on Identifying the categories of companies, public and private, most likely to become the winners and losers in the Artificial Intelligence world which is unfolding in front of us in real time. 

While May’s “First Friday” meeting focused on Artificial Intelligence’s technological leap forward, it reminded everyone watching that significant changes in technological advances usher in changes which are unplanned.  They will be, mostly positive.  However, there could be negative changes also.  The one certainty is change.  Since the evolution of the steam engine, electricity, transportation, the integrated circuit, creation of mobile computers and the internet, certain categories of the U.S. and global population have been advantaged – and some have been disadvantaged.  And quite often those disadvantaged at first, become the advantaged over time.

April’s “First Friday” meeting focused on the market’s expectations that earnings for 2024-2028 will match the 10%+ growth rate delivered by the S&P 500 during the last 5 years.  However, there is a problem with these expectations.  The variables responsible for the last 10+ years of torrid growth are unlikely to be repeated.  If those variables which created the tailwinds don’t reappear, earnings are unlikely to grow at 10%+ over the next 5 years, as the market is expecting.  With current pricing at historically high levels, the U.S. economy slowing, tailwinds gone, and expectations high, the probability that earnings fail to meet expectations is higher than the market believes. 

Today we are going to discuss the 3 themes we believe have a better than 50% chance of influencing our capital markets during 2024. 

You might ask – why this is important? 

In a market environment with abundant uncertainty, it is important to be prepared for any number of shifting environments.   And with current U.S. and global debt levels, at some point, the shifting environments will be more disruptive and surprising.

In January’s “Footnotes” publication, we want to focus on the Signals – ignore the noise – and encourage each Family Office member to make intelligent decisions based on facts and data offering information about the likely future to come.  As we move forward through 2024, it will become as important to tune out the noise as it will be to focus on the signals.  Why? Because debt leverages outcomes.  Debt makes good outcomes great.  Debt makes bad outcomes disastrous.  As this publication goes to press, the U.S. has a record $34 trillion in debt at the national level, a record amount of debt in corporate America, AND a record amount of debt on the balance sheet of our U.S. citizens. 

If you will remember, we started these “First Friday” meetings in October 2022, because we saw storm clouds on the horizon. 

The U.S. Federal Reserve was fighting a bought of inflation which turned out to be stickier than originally thought by increasing interest rates and decreasing the liquidity in our economy.  

History tells us there is an 80% probability of the Fed over-tightening, and eventually sending us into a recession. 

While recessions are events intelligent investors would like to avoid, current conditions have heightened our concerns.  Here is why:  Our U.S. debt has increased by over 30 trillion over the last 40 years.  That’s 30X the debt it took our country over 200 years to amass, and most of it accumulated in the last 15 years.

Click here to download in PDF format: 2023 Market Outlook

Click here to download in PDF format: Second Half 2022 Market Outlook

Click here to download in PDF format: Q1 2022 Market Outlook

Click here to download in PDF format: Q4 2021 Outlook, Q3 2021 Review