Consider:

• The VIX (Volatility Index) is between 12-14. It’s long-term average is roughly 20. Meaning volatility is eerily quiet with it currently residing 35-40% below its average.
  
  
• The S&P 500 will finish the Q2 up about 4%. That’s on pace to more than double the stock market’s average annual return in 2024 and be back-to-back years of 20%-plus performance. A pullback of some sort wouldn’t be a shock.
  
  
• Investor sentiment is strongly bullish. 44% of the respondents in the AAII survey are bullish. That’s way over the 37% historical average of bullish sentiment.  And the CNN Fear/Greed Index has been in “greed” territory for a large majority of this year.
  
  
• Numerous technical market indicators, like Stochastic, Williamson, and others, are showing the market is overbought and stretched.
  
  
• Various valuation metrics show the market is expensive: P/E, CAPE, P/B, P/CF, etc. are all extended well beyond their historical averages.

Taking an opportunity to highlight the strong quarterly performance while at the same time acknowledging the current risks is a low-risk way to have them say “my advisor saw it coming” when volatility returns – as it always does.

It's a wonderful time to be a financial advisor, with all major US equity indexes hitting all-time highs! But as we all know, something will eventually send stocks southbound again.

If you’re at a bigger firm, you can send your clients a generic market outlook from your firm’s CEO or CIO. The problem here they’ve likely never met him/her and it’s the same letter every other client is receiving from all the advisors at the firm.

Or, if you’re at a smaller firm, you can write your own quarterly letter. But writing a quarterly letter is both time-consuming and difficult. On average, the advisors we spoke to said they spent between six and 10 hours researching, writing, editing, and proofing their quarterly letters. If you’re as busy as most of the advisors I know, that’s way too much time and stress to devote to a quarterly letter.

That’s why many advisors don’t seize this opportunity to effectively communicate with their clients and show that they are on top of markets and monitoring risks to portfolios.

At Sevens Report Research, we have a solution to these problems…

The Sevens Report Quarterly Letter includes:

1. A complete, edited and finished client letter, delivered in a word document so it can easily be edited.
   
2. A comprehensive, backup documentation sheet to send to your compliance department, along with your letter, that cites statements on an as-needed basis and verifies all return data.
   
3. Instructions on how we think you should submit the letter to increase compliance approval chances.

* A subscription is just $250 per quarter. Or $915 annually (savings of $85).

Begin your risk-free subscription to the Sevens Report Quarterly Letter right now by emailing us: info@sevensreport.com.

We write quarterly letters in the voice of an advisor, directed towards clients (and prospects), that our subscribers can edit (if they choose to) and send along as their own.

1. Use it “as is.” Meaning put it on your letterhead, get the approval, sign it, and ship it right out the door.
   
   
2. Edit it as you see fit, using the content in conjunction with your own takes.
   
   
3. Send it to anyone you like: clients, prospects, family and friends.

The 2023 rally continued in the first quarter of 2024 as a positive combination of stable economic growth, falling inflation, impending Fed rate cuts and ever-growing enthusiasm towards artificial intelligence (AI) propelled stocks higher, as the S&P 500 rose above 5,000 for the first time and hit new all-time highs.

The year began with a modest uptick in volatility, as traders and investors initially booked profits following the strong 2023 gains. However, those initially small declines intensified shortly after the start of the year when the December Consumer Price Index, an important inflation indicator, declined less than expected. That reading challenged the idea that inflation was quickly falling towards the Fed’s 2.0% target and caused investors to delay the expected date of the first Fed rate cut, as expectations for that first cut moved from March to June. Fears of potentially higher-than-expected rates pushed stocks temporarily into negative territory early in January. However, the declines didn’t last. First, fourth-quarter corporate earnings were again better than feared and that helped stocks recover from those early declines. Then, in late January, the Federal Reserve clearly signaled that rate hikes were over and strongly hinted that rate cuts would occur in the coming months. Investors seized on that positive message and the S&P 500 hit a new all-time high late in the month and finished with a modest gain, up 1.59%. 

The rally continued and accelerated in February as fears of a potential rebound in inflation subsided. Inflation metrics released in February largely met expectations and importantly did not imply that inflation was reaccelerating. As such, investor expectations for a June rate cut were strengthened and that helped stocks extend the year-to-date gains. Then, on February 21st, Nvidia, the semiconductor company at the heart of the AI boom, posted much-stronger-than-expected earnings and guidance. Those results further fueled investors’ AI enthusiasm and large-cap tech stocks powered the S&P 500 higher into month-end as the index hit a new record high above 5,000. The benchmark domestic index gained 5.34% in February. 

The final month of the quarter saw even more gains, aided by familiar factors such as solid economic growth, generally as-expected inflation data, AI enthusiasm and bullish Fed guidance. Broadly speaking, economic and inflation data largely met expectations in March and continued to point towards stable growth and (slowly) falling inflation. Then, in mid-March, updated Federal Reserve interest rate projections still pointed towards three rate cuts in 2024, further reinforcing investor expectations for a June rate cut. Those positive factors combined with additional strong AI-related earnings reports (this time from Micron) to push markets broadly higher as the S&P 500 crossed 5,200 for the first time late in the month and ended March with strong gains.    

In sum, the 2023 rally continued and accelerated in the first quarter of 2024 thanks to positive news flow that implied stable growth (no recession), still falling inflation, looming Fed rate cuts and continued AI enthusiasm and those factors propelled the S&P 500 to new all-time highs.