Continued Progress

Since our last update in July, stock and bond prices have been buoyed by rising corporate profits, moderating inflation, and falling interest rates. Moreover, market performance broadened in the latest quarter, with many sectors and industries participating. This more egalitarian condition was a welcome contrast to the dominance by a few elite stocks during the previous 12-18 months. The latest progress was no doubt vexing for market forecasters, who frequently warned of difficulty in September. Once again, “time in the market” was more profitable than “market timing.”

Policy Pivot

After spiking to a 40-year high of 9.1% in 2022, inflation has steadily declined. The latest monthly measurement puts inflation close to 2.5%, more or less “back to normal.” Encouraged by this improvement, the Federal Reserve Board reduced its policy interest rate by 1/2% at its September meeting. Further reductions are expected in the coming months. In fact, other interest rates have broadly declined from recent highs, in anticipation of more Fed easing. Of note, the benchmark 10-year U.S. Treasury is 3.8% today, down from 4.5% in June.

The move to lower interest rates is important, because it reduces borrowing costs for inventory management, capital spending, and home mortgages. By improving the outlook for economic growth, lower rates should help stabilize the employment outlook. While still low by historical standards, the U.S. unemployment rate has increased from 3.5% in January to 4.2% in September. This unemployment trend will be foremost among many factors the Fed will be watching as it recalibrates interest rates during the next year. 

No Crash Landing

The higher interest rates implemented in 2022-2023 helped slow inflation but did not provoke a recession, an apparent “soft landing.” Nevertheless, certain segments of the economy experienced significant negative fallout. Nowhere was this more evident than in manufacturing. The monthly ISM Manufacturing survey registered below 50 (indicating contraction) for 22 consecutive months, starting in November 2022. In earlier times this slowdown would have resulted in a recession, but manufacturing is only 10% of the U.S. economy today, down from 20% in 1980 and almost 30% in 1950. The economy’s resilience is largely due to a more diversified foundation today, featuring leadership in less cyclical sectors such as technology, health care and services.

Quadrennial Slugfest

In less than a month, Americans will elect a new President. Many citizens will choose a candidate they dislike instead of one they dislike even more. We would be remiss if this commentary ignored the upcoming election, for we know clients are concerned about its implications for economic progress and investment performance. As of this writing, a very close outcome is probable, with neither candidate likely to gain the sizable legislative majorities needed for a sweeping mandate. This sets the stage for incremental rather than radical changes, a scenario that aligns with the slow, deliberate pace of governance envisioned by the Founders. The evolutionary changes we foresee should not be unduly costly or destabilizing for well-managed businesses.

Intense polarization will be a continuing feature of political discourse, with occasionally imbecilic manifestations. However, Bartlett does not believe America is spiraling toward a dystopian future of either fascism or socialism, though media sensationalists benefit by prophesying such doom. For all its imperfections, highlighted in a dispiriting election year, America remains a fertile place for progress. There is certainly room for improvement, which is especially necessary in the country’s fiscal situation. Reforms of tax and spending policies are essential.   

Success Factors

While the political environment can seem frustratingly craven and reactive, we are encouraged by the leadership of companies we have selected for investment. These businesses have thrived by being resourceful, adaptive, innovative, and focused on long-term success. In recent times these companies have skillfully navigated inflationary pressures, supply chain disruptions, and regulatory changes, emerging with increased profitability and enhanced financial strength. Regardless of who occupies the White House, the underlying strength of your investments lies in the quality of the companies owned and their ability to thrive in a variety of political and economic environments.  Complemented by thoughtful financial planning and appropriate asset allocation, this approach should help assure long-term success in meeting your goals. Rest assured your peace of mind will always be Bartlett’s foremost objective.

Good News

We are pleased to report that Bartlett was once again included in Barron’s annual Top 100 Registered Investment Advisors. We won’t be resting on our laurels; we came in at #49 and will try to keep climbing.

Concluding Comments

Bartlett is in the closing stretch of another successful year. We have achieved a client retention rate of 98% and secured some nice new business wins. These accomplishments are possible because of your confidence and loyalty.  We are very grateful for your support, and we will work hard to maintain your trust.

DISCLOSURE

This material provided by Bartlett Wealth Management (“Bartlett”) is for informational purposes only and is not intended to serve as a substitute for personalized investment advice or as a recommendation or solicitation of any particular security, strategy, or investment product. Nothing in these materials is intended to serve as personalized tax and/or investment advice since the availability and effectiveness of any strategy is dependent upon your individual facts and circumstances. Past performance is not a guarantee of future results. Opinions expressed by Bartlett are based on economic or market conditions at the time this material was written; actual economic or market events may turn out differently than anticipated.  Facts presented have been obtained from sources believed to be reliable.  Bartlett, however, cannot guarantee the accuracy or completeness of such information, and certain information presented here may have been condensed or summarized from its original source.  Any reference to an index is included for illustrative purposes only.  Indices are unmanaged vehicles that serve as market indicators and do not account for the deduction of management fees and/or transaction costs generally associated with investable products.