Another positive month of returns for stocks in June brought the first half of the year to a close with the S&P 500 up roughly 3.5% for the month and a very strong 14.5% year to date. (YCharts)

Throughout the year we’ve had portfolios positioned for growth and continue to believe that we’ll likely see stocks move higher over the next 9-12 months.  Of course, if our outlook changes, we’ll be ready to make adjustments.

Given that we’re at the half way point of the year we’re going to review the key areas we highlighted in our annual outlook, and what we’re watching from each of these for the back half of the year.

• Inflation: to begin the year we suggested that it was important to see a continued improvement in inflation data.  While we haven’t seen inflation come down as much as many of us would have liked to see, we haven’t seen it spike.  Moving forward, we believe it’s important that we see a downward trend in inflationary data as stickier than expected inflation could be problematic for the consumer, and monetary policy.

• Monetary Policy – The Fed: At the beginning of the year investors were hopeful that the Fed would begin cutting rates in the first half of the year.  This has not happened, but the good news is that a resilient economy has meant that the Fed hasn’t felt pressured to cut rates due to recession risk. From here we feel it’s likely we see the Fed begin cutting rates soon – investor expectations are for cuts to begin in September. (CME Fed Watch Tool)

• Interest Rates:  The 10 Year Treasury yield has moved higher this year, closing June at 4.36% after beginning the year at 3.88%. (YCharts) The future path of rates is likely to impact both consumer and corporate borrowing.  If we see an improvement in inflation and an easing of monetary policy, we may see improving rates become a tailwind for the economy.

• Other Factors: The labor market, corporate earnings, and the consumer were all areas we felt were likely to be important. Each of these have been resilient and show signs of continued strength, but we will be keeping a close eye on data for any signs of weakness.  We also continue to watch geo-political, and political factors which could be impactful, particularly as we get closer to the presidential election in November.

Our current outlook is for economic growth to continue as we don’t see signs of an imminent recession.  That said, our investment philosophy calls for an active approach, as we seek to shift to a more defensive allocation if we feel that the economic data and our dashboard suggest it’s necessary.  We’ll continue to watch each of the areas mentioned above for signs that we need to make adjustments.

As always, please don’t hesitate to reach out if you have any questions and feel free to pass this email along to any friends, family, or colleagues that you feel would benefit.

Sincerely,

Your Team at TLWM

* Investment advice offered through TLWM, LLC., a registered investment advisor.

* The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. You cannot invest directly in this index.

* The Standard & Poor’s 500 (S&P 500) is an unmanaged index. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment.

* The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.

* Government bonds and Treasury Bills are guaranteed by the U.S. government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value. However, the value of fund shares is not guaranteed and will fluctuate.

* Corporate bonds are considered higher risk than government bonds but normally offer a higher yield and are subject to market, interest rate and credit risk as well as additional risks based on the quality of issuer coupon rate, price, yield, maturity, and redemption features.

*Credit risk can be a factor in situations where an investment’s performance relies on a borrower’s repayment of borrowed funds. With credit risk, an investor can experience a loss or unfavorable performance if a borrower does not repay the borrowed funds as expected or required. Investment holdings that involve forms of indebtedness (i.e. borrowed funds) are subject to credit risk.

* Typically, the values of fixed-income securities change inversely with prevailing interest rates. Therefore, a fundamental risk of fixed-income securities is interest rate risk, which is the risk that their value will generally decline as prevailing interest rates rise, which may cause your account value to likewise decrease, and vice versa. How specific fixed income securities may react to changes in interest rates will depend on the specific characteristics of each security. Fixed-income securities are also subject to credit risk, prepayment risk, valuation risk, and liquidity risk. Credit risk is the chance that a bond issuer will fail to pay interest and principal in a timely manner, or that negative perceptions of the issuer’s ability to make such payments will cause the price of a bond to decline.

* Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.

* Economic forecasts set forth may not develop as predicted and there can be no guarantee that strategies promoted will be successful.

* Past performance does not guarantee future results. Investing involves risk, including loss of principal.

* You cannot invest directly in an index.

* Consult your financial professional before making any investment decision.

* Stock investing involves risk including loss of principal.

* This document is solely for informational purposes. Advisory services are only offered to clients or prospective clients where TLWM Financial and its representatives are properly licensed or exempt from licensure.

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