Zacks Investment Management

2024 is well underway, making it the perfect time for investors to take stock of their portfolios and explore fresh investment strategies. In this issue of Steady Investor, we take a look at three themes that could shape your investment approach:

• Retail sales better than expected in June
• U.S. consumer sentiment falls
• Small-cap stocks making a comeback

Retail Sales Were Flat for the Month of June – At first glance, retail sales numbers for June were fairly uninspiring. According to Census Bureau data released last week, June retail sales were flat compared to May, at $704.3 billion (compared to $704.5 billion in May).¹

But three key features of the June data make this retail sales report positive news. The first is that consensus estimates for June were for a -0.3% month-over-month decline, and markets tend to appreciate “better-than-expected” outcomes. The second feature is that May’s retail sales data was revised higher to an increase of 0.3% month-over-month, better than the prior reading of 0.1%. The third feature was that when the volatile categories were excluded from June data—which is the so-called “control group” that matters most to GDP—sales were seen rising by 0.9% month-over-month, well above estimates for a 0.2% increase. Readers can likely see how all of this factors as positive news—consumers are spending more strongly than most analysts and economists are expecting, which we would argue has been the dominant theme in the U.S. economy over the past year. These retail sales numbers do not suggest gangbusters GDP growth for Q2, but it appears all but certain the U.S. economy expanded again for the quarter—even if just modestly.

How to Protect Your Retirement Savings from Life’s Surprises

You’ve diligently saved for retirement, but unforeseen events could jeopardize your financial security.

To prevent sudden changes in your portfolio, we recommend having a solid strategy to navigate the market’s ups and downs.  Our free guide, How Solid Is Your Retirement Strategy?³ can help you build a retirement strategy that takes the “what ifs” into account.

This guide also offers our views on some key retirement investment strategies that may help you preserve your financial security in retirement, including:

• The importance of flexible portfolio allocation
• Why keeping some liquid assets can potentially help you preserve more wealth
• Understanding your risk tolerance in case of a market downturn
• Plus, more strategies to help you protect your retirement assets

If you have $500,000 or more to invest, get our free guide by clicking the link below.

Get our FREE guide: How Solid Is Your Retirement Strategy?³

Meanwhile, U.S. Consumer Sentiment Hits 8-Month Low – Even as consumers in aggregate continue to spend solidly, sentiment has been trending lower. According to a preliminary reading from the University of Michigan’s Consumer Sentiment Index, consumers soured on the economy in July. The sentiment index fell to 66 in July from 68.2 in June, while consensus expectations were that sentiment would improve for the month. The “current conditions” gauge fell to its lowest level since December 2022, and consumer expectations for the economy also declined to an 8-month low. And to pile on even more, consumers’ perception of their financial situation also fell to its lowest level since October, when the stock market was experiencing downside volatility. Sentiment measures are important in understanding how people feel about the economy. But for investors, souring sentiment serving as a backdrop against solid economic fundamentals such as falling inflation, rising wages, and a strong jobs market can often signal that there is still plenty of pessimism in the current cycle. That indicates the “wall of worry” is still there for stocks to climb, in our view.⁴

Are Small-Cap Stocks Making a Comeback?  From a pure valuation standpoint, high-quality small-cap stocks trade at a historically large discount to their large-cap peers, even though many of them have similar profit margins and free cash flows. Indeed, over the past decade, small- and mid-cap companies have grown earnings—on average—faster than their large-cap peers. For small-caps, stock price appreciation over that time has lagged their large-cap peers, but has also been driven far more by earnings growth than multiple expansion. As Mitch Zacks wrote in a recent column, “For the active investor with a focus on earnings growth, strong balance sheets and free cash flows, and balanced risk-adjusted performance and diversification, small- and mid-cap stocks could offer a unique opportunity in the current environment.” It appears small-cap stocks may indeed be making a run for it. In the past week, the Russell 2000 index of small-cap stocks has outperformed the S&P 500 by about 10%, which is the largest outperformance since data has become available. The Russell 2000 has also outperformed the Nasdaq by about 11% over the same time period, the largest outperformance since December 2000.⁵

Can Your Retirement Strategy Withstand This Market? Market volatility is inevitable, and if you’ve worked hard to build your retirement portfolio, it’s crucial to adopt a strategy that anticipates potential challenges.

To create a retirement strategy resilient enough to safeguard your nest egg from financial storms, we recommend downloading our free guide, How Solid Is Your Retirement Strategy⁶.

You’ll get our insights on:

• The Importance of flexible portfolio allocation
• Why keeping some liquid assets can potentially help you preserve more wealth
• Understanding your risk tolerance in case of a market downturn
• Plus, more strategies to help you protect your retirement assets

If you have $500,000 or more to invest, download our free guide today!

Disclosure