Each new year brings hope and excitement for us here at The Life Financial Group. We rejoice that we are one year closer to the Lord’s return. We are excited for another year to serve Jesus through serving our clients.
When it comes to writing this letter, we struggle to know just what to say. We could dump a ton of data on you and explain why PE ratios are so high and what they may mean for the year ahead. I expect that kind of letter to appeal to only a small subset of our readers. Or we could make wild predictions about 2025. While that would attract readers, it likely would be very inaccurate, thus wasting your time.
That being said, we would like to share a few thoughts with you on the economy, bond, and stock markets, and conclude with a few observations about what the Trump election might mean for you.
Market Thoughts
Economy – The US economy showed continued improvement last year despite concerns surrounding the election and inflation. Unemployment is still low (4.2%) and the cost of living is stabilizing (2.7%). For the longest time, interest rates on short-term bonds and bank CDs have been higher than their longer-term variants. This is called an inverted yield curve. Often this points to a potential recession. Over the past few months, we’ve seen interest rates reverting to a closer-to-normal curve. This, too, is a positive development.
Bond Market – Last year, we accurately projected that 2024 would see stabilization and likely improvement in the bond markets. Although the market has started to recover, its progress has been slower than expected and is far from complete. Last year, bond prices rose in anticipation of the Federal Reserve lowering interest rates. However, once rates started to come down, bond prices started to fall again. The timing of this was frustrating but we do expect that bonds will recover in due time.
Stock Market – Over the past 2 years, we’ve observed how a handful of gigantic companies (mostly tech-related) have driven most of the investment returns in the S&P 500. In the chart on the next page from JPMorgan’s 12/31/24 “Guide to the Markets” report, note how in 2024, these stocks called the Magnificent 7 had an average return of 48% while all the remaining stocks in the S&P 500 only had a 10% return. The outperformance of these 7 companies can’t last forever. At some point, we expect the rest of the market may start carrying its own weight.
Source: FactSet, Standard & Poor’s, J.P. Morgan Asset Management.
*Magnificent 7 includes AAPL, AMZN, GOOG, GOOGL, META, MSFT, NVDA and TSLA. **Share of returns represent how much each group contributed to the overall return. Numbers are always positive despite negative performance in 2022.
Small and Medium Companies – Over the past 10-plus years, we’ve seen small to medium-sized companies struggle to keep up with larger companies. Several of the factors that contributed to these struggles are reversing themselves, which may create a significant growth opportunity for small to medium-sized companies. Many of our portfolios are already positioned to potentially benefit from this development.
Election – With Donald Trump’s election win, some may be tempted to believe that there is no need to worry about risk since the new administration will be pro-business and pro-deregulation. While we believe that the election outcome and its implications are favorable for the US economy, it is important to remember that there are many other factors beyond politics that influence the economy and the markets. Caution is still needed as the markets are still at or near all-time highs. Even the most business-friendly administration can’t stop profit-taking or shocks to the market.
Another thing that we are looking forward to from the 2024 election outcome is the increased likelihood that the Trump tax cuts will be made permanent. The current tax code is set to expire at the end of 2025. Practically, this means that Qualified Charitable Distributions (QCDs) are going to continue to be a good idea for charitably-minded retirees. It would also extend the timeframe for converting your IRAs to Roth IRAs at our historically low tax rates. Please seek tax advice before doing a Roth conversion to make sure that it makes sense for you.
Important LFG Updates!
Roy’s Retirement: After 47 years of serving clients, our founder and CEO, Roy Russell, is retiring. We are so grateful for his years of leadership. He plans to continue to keep in touch with many of his clients who have become friends. For the foreseeable future, he plans to occasionally come into the office to keep up communication. Keep in mind that since Roy is dropping his licenses, he will be delegating the giving of financial advice to Tim Russell and the other advisors in the office. Clients will be informed by Roy about the update to their advisory team over the next few months.
LFG Leadership: Roy’s transition has been slow and intentional. His son, Tim Russell, has been running the day-to-day operations of LFG for the past few years. Tim is assisted by the Executive Leadership Team to make decisions on how to best fulfill our mission of helping Christians become even better stewards of all their assets.
New Advisor: We have been training up additional advisors to help serve our clients. We look forward to moving Stephen Rohrer into an Advisory role in the Spring. He has already demonstrated wisdom beyond his years. Stephen is married to Sarah and has 3 beautiful daughters aged 2 and under. He was born and raised here in Pennsylvania. He is fluent in Mandarin Chinese and worked in sales before joining our team. Working with our experienced team, Stephen is learning the needed skills to successfully serve clients.
Closing Thoughts
Thank you for choosing The Life Financial Group. We value you and your family. Our mission is to help Christians become even better stewards of all their assets. We are so grateful to be a co-steward with you. Please tell others about our work and ministry.
Yours in Christ,
LFG Advisory Team
Tim Russell, Roy Russell, Jeremy Ehst, Mark Magruder, Steve Virkler, Angel Sotomayor
P.S. – 2024 Tax Return – Please remember to send us a copy of your tax return once it’s completed. This allows for comprehensive, customized recommendations for your specific situation.
P.P.S. – Charitable Giving – Our clients are extremely generous. For those who have reached age 70 ½ please talk with your advisory team about the benefits of giving money to your church or other non-profit organizations through a Qualified Charitable Distribution (QCD).
Securities & Advisory services offered through Geneos Wealth Management. Member FINRA/SIPC
