July 2024 Financial Bullet Points

This monthly communication, “Financial Bullet Points,” will quickly and easily cover the main financial issues we see affecting the markets without being bogged down with a lot of details.

Written by Bob Barber, Prepared on June 24th, 2024

The Bullet Points for July are:

1. 1. 1. Significant divergences: a cause for concern. We’re seeing a notable divergence in returns between small/mid-cap value indexes and the S&P 500. Historically, when this happens, the out-of-favor indexes rebound in the following years, while the previously favored ones lose momentum. Today, just 5-6 companies account for about 60% of the S&P 500’s year-to-date returns, with most coming from a single company. This concentration is a worrying sign for investors.
      2. Overemphasis on a few companies: echoes of the dot-com bubble. The current market’s excessive focus on a few companies in the S&P index is reminiscent of the internet bubble of 1999-2000. We advise avoiding these overvalued companies and opting for a diversified portfolio of undervalued ones. History shows it’s only a matter of time before the markets recognize the unsustainable bullishness surrounding the handful of companies driving the S&P 500 today. Investors should learn from past experiences.
      3. Déjà vu: the parallels between 1999 and today.In 1999, the market’s focus was on AOL and Cisco for internet services. Today, the spotlight is on Nvidia for AI chips. However, other established chip companies like IBM, Intel, AMD, and Qualcomm exist. It’s unlikely Nvidia will capture all their market share indefinitely. In the long run, competition prevails, and we may wonder how the market became so fixated on a single AI chip manufacturer.
      4. Lessons from the past: The importance of patience and diversification. In 1999, some clients were impatient because their returns didn’t match a few exceptional performers. Just as I did then, I advocate for investing in undervalued companies before a bubble bursts. From 2000-2003, our clients saw undervalued companies outperform the previously overvalued ones. While past performance doesn’t guarantee future results, history often repeats itself. Patience and diversification are key to navigating market cycles and achieving long-term success.
      5. Continuing Education. This month’s programs for Christian Financial Perspectives are:
         • Ep 203 – Ten Biblical Investment Principles – 7/2/2024
         • Ep 204 – Budgeting without Counting – 7/19/2024
         • Ep 205 – Financial FOMO [Fear of Missing Out] – 7/30/2024

           • Remember, we moved to releasing episodes every other week to give people more time between episodes to listen or watch. To tune in, search “Christian Financial Perspectives” on almost any podcast platform or YouTube.

           • Visit our channel: www.cfa.lc/yt

      6. Scriptures for this Month.
         • Ecclesiastes 1:9 – History merely repeats itself. It has all been done before. Nothing under the sun is truly new.
         • Ecclesiastes 11:2 – But divide your investments among many places, for you do not know what risks might lie ahead.

Until next time, have a great July, and try to stay cool with it heating up so much!

If you would like further explanation of any of the bullet points mentioned, please call or text (830) 609-6986 during business hours or email us by clicking here.

Bob Barber, Founder & Owner
Christian Financial Advisors