Economic News

2025 2nd Quarter Investment Management

March Winds and April Showers Bring Forth May Flowers

The S&P 500 was up 6.15% in May and followed that with an increase of 5.1% in June, close to its all-time high. It ended the quarter up 10.94% and 6.20% for the first two quarters of 2025. Big is still better, as the small cap Russell 2000 Index was up 8.5%, but negative for the first six months of the year with a loss of 1.79%. Foreign stocks extended their winning ways with a gain of 10.58% in Q2.

Federal Reserve Stays the Course

Financial markets are betting the data dependent Federal Reserve will most likely not make a cut at its July meeting.

Federal Reserve Chairman Jerome Powell told Congress last month that, “For the time being, we are well-positioned to wait to learn more about the likely course of the economy before considering any adjustments to our policy stance.” 

The futures market anticipates two cuts before the end of the year. The Fed, however, will make the number and size of the cuts based on its outlook for inflation and the prospects for economic growth. Deterioration in the economic outlook, such as weakness in the labor market, could accelerate rate cuts. While the unemployment rate remains low at 4.2%, leading indicators of job growth are pointing to a cooling labor market, with jobless claims now at their highest level since November of 2021.

Inflation and Tariffs

Inflation continues above the Fed’s 2% target. Prices in the U.S. rose 2.3% in May compared with a year ago, up from just 2.1% in April. Excluding the volatile food and energy categories, core prices rose 2.7% from a year earlier, an increase from 2.5% the previous month. Inflation is expected to rise if the tariffs become too onerous. The added costs will end up being paid by someone along the supply chain — whether it is manufacturers, retailers, or consumers.

The One Big Beautiful Bill Act (OBBBA)

Just after the end of the quarter, on July 4, Congress passed new tax legislation. It permanently extends the individual tax rates of 2017. The SALT (state and local tax deduction) cap was raised from $10,000 to $40,000 (for taxpayers making less than $500,000). The bill includes temporary tax deductions for tips, overtime pay, and auto loans for certain cars made in America. However, it raises the debt ceiling by $5 trillion. It also makes significant cuts to Medicaid spending of about 12%. The OBBBA includes new defense spending of $150 billion and another $150 billion for border enforcement.

The Congressional Budget Office (CBO) estimates the budget deficit will increase by about $3 trillion in 2034 and that nearly 11 million Americans will lose health insurance coverage. 

The jury is still out on whether the bill and tariffs will spur manufacturing and economic growth at home. However, what it does accomplish is to bring certainty and closure to other outcomes. Markets loathe uncertainty and we now have policy clarity with the passage of the One Big Beautiful Bill. 

Our Contact Information

3838 Camino del Rio North
Suite 365
San Diego, CA 92108
619.255.9554

info@plattwm.com

www.plattwm.com

Planning Ahead

The market’s rebound from April lows is encouraging, yet significant headwinds remain for economic growth. With tariff uncertainties, global tensions, and market volatility, it is crucial to stay focused on your long-term goals. Investing success comes from thoughtful strategy, as opposed to market timing. Volatility is part of the process.

We continue to navigate this dynamic environment through disciplined portfolio management and asset allocation while implementing portfolio rebalancing, asset location, and tax loss harvesting. Please do not hesitate to reach out to us if you have any questions about your portfolio.

Best regards,

Your team at Platt Wealth Management

2025 1st Quarter Investment Management

2025 1st Quarter Investment Management

Celebrating Our Team

We’re thrilled to announce two impressive achievements within our team this quarter! These achievements represent exciting new chapters in their professional journeys. We are fortunate to have them on our team.

Professional woman with long hair wearing glasses

Congratulations to Kim on her well-deserved promotion to Senior Client Service Associate—her dedication to our clients and exceptional operational skills have made her an invaluable member of our team.

Read more about Kim

 

Younger financial advisor in a dark suit with blue tie

Congratulations to Kai for passing Level 1 of the CFA exam. This significant milestone demonstrates his commitment to professional development and advancing his expertise in asset valuation and portfolio management.

Read more about Kai

 

Major US Stock Indexes

 The S&P 500 began 2025 on strong footing until tariffs were imposed in February, with the index closing the quarter well off its February highs, along with declines in other major indexes.

    • The S&P 500 declined by -4.27%.
    • The Nasdaq 100 fell by -8.07%.
    • The Dow Jones Industrial Average decreased by -0.87%. 

Labor Market and Payrolls

The US economy added 228K jobs in March 2025, well above a downwardly revised 117K in February. This beat forecasts of 135K for March and it is the strongest figure in three months.

The unemployment rate changed little at 4.2 percent. It remains to be seen what changes will occur with the recent Federal firings brought about by Elon Musk and the Department of Government Efficiency.

    Inflation

    CPI readings flashed mixed data in Q1. Consumer inflation climbed from December through February and then fell in March. The yearly CPI inflation rate was 2.8% in March, coming down from 3.0% in February. The Fed’s target inflation goal on an annual basis is 2.0%. As we have indicated often in the past, getting to 3% or slightly lower would be relatively easy for the Fed. The difficulty continues to be getting to 2.5% and then to 2%. Inflation remains stickier, which makes it more difficult for the Fed to lower rates. This is even more pronounced today as tariffs are inflationary in the long term.

      The Fed and Rate Cut Possibilities

      The overnight lending rate set by the Fed remained unchanged during the first three months of 2025. The Federal Reserve minutes revealed concerns about potential tariff impacts on inflation, leading to a cautious stance on rate cuts. Fed Chairman Jerome Powell repeated his concern the first week of April,

      “We face a highly uncertain outlook with elevated risks of both higher unemployment and higher inflation. While tariffs are highly likely to generate at least a temporary rise in inflation, it is also possible that the effects could be more persistent.”

      Powell’s comments, come just days after the Trump administration unveiled the largest escalation in US tariffs. These are even steeper than the tariffs deployed under the Smoot-Hawley Act of 1930. Most economists concur that those tariffs, while not responsible for the Great Depression, certainly exacerbated it.

        Recession

        At the beginning of the year JPMorgan projected the chances of a recession in 2025 to be about 20%. The potential of tariffs slowing both US and worldwide economic growth, along with increasing the likelihood of inflation, they now put the chances of a recession at 60%.

         

         

        Our Contact Information

        3838 Camino del Rio North
        Suite 365
        San Diego, CA 92108
        619.255.9554

        Smoot Hartley, passed in 1930 shortly after the market crash of 1929, raised tariffs on a wide range of imported goods. While the act aimed to protect American industries from foreign competition, other countries retaliated with their own tariffs on American goods. This further restricted international trade, and these trade wars further strained international trade relations, which added to economic and political instability at that time.

        While history does not repeat itself, it often rhymes. Hopefully, calmer, well thought out approaches to tariffs will lower the chances of a recession. We may have already seen examples of this as Washington now has paused for 90 days on many of the Liberation Day tariffs, apart from those on China.

        Your Portfolio

        Diversification has always been a key component in the construction of client portfolios. We certainly saw this in Q1. While the S&P 500 fell 4.3%, the MSCI EAFE international index was up 6.9% in Q1. Meanwhile, bonds held up well in the quarter, returning 2.8%.

        It has been an eventful and uncertain quarter in the financial markets. We have been here before. OK, not exactly here, but close enough. Markets absorb events and changes, such as the pandemic, economic contraction, and inflation spikes. This, too, shall pass. Remember we are always here for you. If you have questions or concerns, please do not hesitate to reach out.

        2024 4th Quarter Investment Management

        Stocks: Long term Investors Come out on Top

        It has been a wonderful two-year stretch for U.S. stocks. The S&P 500 index just delivered the best two-year calendar stretch since 1998. The index returned 25.02% in 2024, following a 26.29% advance in 2023. The key is to stay invested. Through all the headlines, the interest rate cycling, elections, etc., long-term investors came out on top again.

         

        Reversion To the Mean – Not Yet

        Large caps continue to outperform small caps and growth continues to dominate value. The large cap Russell 1000 Growth index was up 33.36% in 2024, while the large cap Russell Value index was up 14.37% for the year. Meanwhile, the small cap Russell 2000 Growth index was up 15.15% in 2024, while the small cap Russell 2000 Value index was up 8.05%. At some point the disparity between growth and value should diminish, along with the relative underperformance of small cap stocks versus large cap stocks.

        Bonds fared well for the first nine months of the year, but had an ugly pullback in the 4th quarter due to interest rate concerns. The US Aggregate Bond index finished up only 1.36% for the year.

         

        Jobs + Yields = Concerns

        Up until last week the jobs data was deemed as Goldilocks – not too hot to be inflationary, and not too cold to raise concerns about a recession. December numbers revealed an increase of 256,000 jobs, exceeding the consensus estimate of 155,000. The U.S. unemployment rate edged lower to 4.1% down from 4.2%.

        The apparent good news for the economy could be bad news for interest rates. With the beginning of the Fed rate cuts in September, the 10-year note yield has moved from around 3.6% to 4.7%. This may put the brakes on any rate reductions in 2025.

        Inflation and the Fed

        The final phase of tackling inflation is taking longer than many anticipated. Consumer Price Index (CPI) and Producer Price Index (PPI) remain above the Fed’s 2% target. CPI data for November showed a monthly increase of 0.3%, raising the annual rate to 2.7%, up from 2.6%.

        Sectors like housing and services continue to drive inflation metrics higher. The Fed reduced the benchmark overnight lending rate at its December meeting by 25 basis points, bringing the target rate to 4.25%-4.50%, meeting market expectations. The move came after reductions of 50-basis-points in September and 25-basis-points in November. The Fed had indicated that it is looking at two rate cuts in 2025 versus the four it had projected last September. The jobs numbers and 10-year note yield will have the Fed reevaluating once again how many, if any cuts will take place this year.

         

        Our Contact Information

        3838 Camino del Rio North
        Suite 365
        San Diego, CA 92108
        619.255.9554

        info@plattwm.com

        www.plattwm.com

        Planning Ahead

        Keeping you informed is a top priority, and as more developments occur, we will keep you apprised of them. And of course, if your New Year’s resolution is financially based or if there is anything we can help you with, please don’t hesitate to get in touch with us. We are always here as a resource for you.

        Best wishes for a healthy, happy, and prosperous New Year!

         

         

        Staying Invested During Volatile Markets

        Staying Invested During Volatile Markets

        Economic Analysis by Jeff Platt and Kai Kramer

         

        You may have been watching the news and wondering about the recent market turbulence. We see several main factors affecting markets at this time:

          • Unemployment rate increased from 4.1% to 4.3% in July
          • Jobs growth totals 114,000 in July, coming in lower than the expected 175,000
          • Jobless claims for the week ending July 27 climbed by 14,000 to 249,000

        Additionally, the Bank of Japan raised their interest rates last week from 0% – 0.1% to 0.25%. The rise in interest rates has caused the yen to appreciate versus the dollar, which is putting an end to a common strategy called a “carry trade.” This is where investors borrow in a cheap currency to buy other (higher yielding) global assets.

         

        So what are we doing about the market drop?

        We have all heard the phrase, “Don’t just stand there; do something!” John Bogle, founder of Vanguard, modified this for long-term investors to say, “Don’t do something; just stand there!” In today’s investment environment, both expressions are true. This may sound familiar to many of you as it is exactly what we wrote in our quarterly newsletter of April 2020 when we saw a similar market drop at the beginning of the COVID-19 pandemic.

        You might also remember how we stayed the course through that turbulent time by maintaining equity positions, rebalancing portfolios to long-term strategic asset allocation (IPS), and doing some tax loss harvesting. These responsive moves benefited portfolios.

        We believe that the recent movement in the markets may be another opportunity for investors with a long-term perspective.

         

        Strategically, we will continue to maintain each client’s asset allocation because even if we were 100% convinced a recession was coming and we sold out of equities, we would still need to decide when to reenter the market and we DO NOT want to miss that window.

        The graph below shows how annualized returns would diminish by missing the 10, 20, 30, 40, 50, and 60 best trading days of the 21-year period between 2002-2023. During that time, the S&P 500 would have returned 9.0% annualized. If you missed just the best 10 days, the annual return fell to 4.8%. If you missed the best 30 days, your returns would be negative! This illustrates the difficulty of trying to time the market and how detrimental this could be to one’s portfolio.

        Maintaining portfolio allocations is more difficult when markets experience this type of volatility. Over time, however, investors are compensated for their stock market exposure. Remember, too, that the proper asset allocation is the one you will not abandon during difficult times.

        We hope this information provides you with some peace of mind at this time. If you have any questions about what you are seeing in the news or about your portfolio, please do not hesitate to get in touch.

        Are you on track for retirement?

         

        Making sure you will be ready for retirement can be overwhelming. Funding your retirement accounts over the years is a critical part of your journey to the retirement of your dreams. An experienced Financial Advisor can help you navigate the complexities of investment management. Talk to a Financial Advisor>

        Dream. Plan. Do.

        Platt Wealth Management offers financial plans to answer your important financial questions. Where are you? Where do you want to be? How can you get there? Our four-step financial planning process is designed to be a road map to get you where you want to go while providing flexibility to adapt to changes along the route. We offer stand alone plans or full wealth management plans that include our investment management services. Give us a call today to set up a complimentary review. 619-255-9554.

        Historic Fed Rate Hikes (Again): Where Do We Go from Here?

        Historic Fed Rate Hikes (Again): Where Do We Go from Here?

        At its March 2nd Federal Open Market Committee (FOMC), the Federal Reserve board voted to raise short-term rates another 25 basis points—the second such increase this year. It was the ninth rate hike since March 22, 2022, in an all-out effort to tame rising inflation, which had surged to its highest levels in 40 years.

         

        The number of rate hikes is not unprecedented—the Fed increased rates 17 times between 2004 and 2006 to cool a bubbling housing market. What is unprecedented is the velocity of the rate hikes, taking the short-term rate from near zero to nearly 5.0% in a relatively short period of time. That period included four increases of 75 basis points and two 50-point hikes. Such steep increases have been unheard of in the last three decades.

         

        By some measures, inflation appears to be cooling somewhat though prices of many essential items remain at record high levels. Where the Fed goes from here is not entirely clear. Since its initial burst of rate hikes last year, the Fed has been walking a tightrope in trying to curb rising inflation without tipping the economy into a deep recession.

         

        Recent Events Increasing Fed Challenges

         

        In an ideal world, the Fed would be able to gradually moderate inflation by closely calibrating its rate hikes until demand and supply are balanced while allowing the economy to grow. But the events of the first quarter of 2023 have reaffirmed that this isn’t an ideal world, which complicates the Fed’s job and notches up the tension on the tightrope.

         

        Though the stock market rebounded nicely in the first quarter, it wasn’t without significant economic and geopolitical drama, creating a wall of worry for the market to climb. In just three months, we’ve experienced several remarkable and potentially cataclysmic events, including:

         

        • Rising tensions between the U.S. and China punctuated by the downing of a Chinese spy balloon that was allowed to traverse most of the U.S.
        • The U.S. inching closer to a “hot war” with Russia as it escalates its military aid to Ukraine.
        • The second largest bank failure in U.S. history with fears of more to come.
        • Brazil and Saudi Arabia joining China, Russia, and a dozen other countries in replacing the U.S. dollar as their primary trading currency.
        • An unexpected reduction in oil production by OPEC+, driving up oil prices sharply with an increase in gas prices to follow.
        • Lingering concerns over an imminent recession.

         

        And that was just one quarter. In most years, any one of these events would weigh heavily on the U.S. economy. The Fed must contend with all of them at once as they consider their next move.

         

        How Did We Get Here? 

         

        With interest rates already near zero at the beginning of the pandemic, the Federal Reserve put quantitative easing on steroids as the economy plunged into a recession, ballooning the federal balance sheet to nearly $9 trillion. This was done to increase the money supply and stimulate economic growth during the damaging COVID pandemic. As the growth of production of goods and services slowed, the raging money supply growth eventually overtook it, causing the price of goods and services to be bid up. When too many dollars are facing too few goods, you get inflation.

         

        Then add in supply chain issues and increasing wages occurring at the time, causing employers to have to pay more to get people to come to work. That contributed heavily to inflationary pressures on the market. Despite the record low unemployment numbers at the time, there were still four to five million people not working, not contributing to production, which also contributed to the supply chain issues and rising prices.

         

        Often ignored in the inflation equation is the velocity of money—the rate at which money is exchanged in the economy. Following the financial crisis in 2008 and the COVID pandemic in 2020, consumers were more inclined to save their additional dollars out of caution. During COVID, it was also because many services were no longer available for purchase, such as travel and restaurants.

         

        Then, as COVID restrictions lifted, consumer activity reached pre-pandemic levels, increasing the velocity of money and setting the stage for more prolonged inflation.

         

        As the inflation rate began to tick up in 2021, the Federal Reserve viewed it as transitory, caused by temporary supply and demand imbalances that would self-correct. That didn’t happen and inflation worsened, catching the Fed and everyone else off guard. That’s the reason the Fed took such drastic actions in 2022, increasing fears it could lead to a deeper recession.

         

        Where We Go from Here

         

        Consumers have been spoiled by low interest rates for a while. However, to put higher rates in perspective, mortgage rates, which are currently hovering around 6%, were as high as 18.5% in the 1980s. A normal business cycle lasts about six years, which usually encompasses an economic slump and an economic recovery.

         

        Coming off a deep, albeit short-lived, recession in 2020, interest rates were kept low for an extended time and must now rise to combat inflation. The good news for consumers is an increase in rates is inevitably followed by a decrease in rates. The bad news is that it typically happens when the economy is slowing down.

         

        At Platt Wealth Management, we remain committed to helping you navigate these challenging times. We also encourage you to stay informed and engaged with the economy and markets. As we’ve seen throughout history, the markets are resilient, and they recover to new highs over time.

         

        Of course, we are always here to answer your most pressing questions and address your concerns. Simply reach out to the office to schedule a time to speak with your advisor.

         

        Sincerely,

        Your Platt Wealth Management Team

         

         

        Resources:

         

        FOMC meeting calendar and information: https://www.federalreserve.gov/monetarypolicy/fomccalendars.htm

         

        Bureau of Labor Statistics on inflation: https://www.bls.gov/cpi/

         

        The velocity of money and its impact on inflation: https://www.investopedia.com/terms/v/velocity.asp

         

        Federal Reserve’s perspective on transitory inflation: https://www.federalreserve.gov/newsevents/speech/brainard20210601a.htm

         

        Historical mortgage rates in the U.S.: https://fred.stlouisfed.org/series/MORTGAGE30US

         

        Business cycle basics: https://www.investopedia.com/terms/b/businesscycle.asp

         

         

         

         

         

        Are you on track for retirement?

         

        Making sure you will be ready for retirement can be overwhelming. Funding your retirement accounts over the years is a critical part of your journey to the retirement of your dreams. An experienced Financial Advisor can help you navigate the complexities of investment management. Talk to a Financial Advisor>

        Dream. Plan. Do.

        Platt Wealth Management offers financial plans to answer your important financial questions. Where are you? Where do you want to be? How can you get there? Our four-step financial planning process is designed to be a road map to get you where you want to go while providing flexibility to adapt to changes along the route. We offer stand alone plans or full wealth management plans that include our investment management services. Give us a call today to set up a complimentary review. 619-255-9554.

        5 Tips to Stay Calm During a Market Downturn

        5 Tips to Stay Calm During a Market Downturn

        Is the economy slowing down? How will rising interest rates impact my finances? Is a recession around the corner? Scroll through any newsfeed and you’ll hear these unsettling questions. And while the headlines can be alarming, we remind our clients of the benefits of staying calm, cool, and collected—keeping their eyes off the headlines and focused on the end goals we have set up for them. 

         

        Stay Invested

         

        Some of the costliest mistakes investors make come down to one thing and one thing only…their emotions! If you have a sound investment strategy, there’s no reason to “jump ship” in a downturn. This is called panic selling. Panic-selling is when you sell your assets when values are down to try and avoid further loss, with the intention of “jumping back in” when the market has recovered. The thing is, though, that we never know when or where the bottom is, nor do we know when it will recover.

         

        Remember Big Dips Can Precede Large Surges

         

        And, because the market has some of its best days right after some of its worst, most investors miss out on the recovery and end up re-buying similar assets at a higher price—plus the liability on tax events they may have triggered by liquidating their assets. Just consider those who sold at the bottom of the March 2020 COVID-induced drop and missed out on the miraculous, V-shaped recovery we saw over the next two years.  If fear prompts you to sell, you could miss the upside.

         

        Take Your Eyes (and Ears) Off the Market

         

        Where focus goes, energy flows. The more you buy into the headlines, the more emotionally affected you may be by them. But no matter how diligently we watch the headlines, none of us can control what will happen with the stock market. So, if you feel the noise in the media tempting you to make a financial move you might regret, just tune out the noise. And of course, connect with your financial advisor to discuss your concerns. This is often all that is needed to restore a sense of peace and confidence in the financial plan.

         

        Focus on What You Can Control

         

        There are some aspects of our financial lives that we can control with our actions, and others we cannot. As discussed earlier, we can’t predict market volatility – and we certainly can’t control it – but we can understand that its disruptions are temporary and won’t result in permanent loss. As long as your advisor is re-balancing and speaking with you about how they are handling your portfolio during the downturn, it’s unlikely there is much needed from you—except, of course, your trust in the process, the plan, and the long-term goals your advisor set up for you.

         

        Lean on the Help of Your Financial Advisor

         

        Your financial advisor is here to help you with more than just investment management, tax planning, and retirement planning. We are here to help you stay even-keeled and level-headed when major and minor events threaten your cool. Of course, we update, re-balance, and diversify your portfolio ongoing to make sure you stay on track to reach your goals, but if a market downturn has you worried, we’d be happy to go over your financial plans with you at any time.

         

        Remember, the market moves up and down daily. Market downturns (and upswings) are par for the investing course. We’re here to help you make the most of each situation to maximize your returns long-term.

         

         

         

         

         

        Are you on track for retirement?

         

        Making sure you will be ready for retirement can be overwhelming. Funding your retirement accounts over the years is a critical part of your journey to the retirement of your dreams. An experienced Financial Advisor can help you navigate the complexities of investment management. Talk to a Financial Advisor>

        Dream. Plan. Do.

        Platt Wealth Management offers financial plans to answer your important financial questions. Where are you? Where do you want to be? How can you get there? Our four-step financial planning process is designed to be a road map to get you where you want to go while providing flexibility to adapt to changes along the route. We offer stand alone plans or full wealth management plans that include our investment management services. Give us a call today to set up a complimentary review. 619-255-9554.

        Login

        [ultimatemember form_id=”1899″]

        ×