Today, I’m sharing five of my favorite investing & economic charts from the past month.

These charts cover topics such as:

• Future interest rate cuts
• The looming recession
• Investing in cash...and more!

Before we dive in, did you catch the most recent podcast?

Small Cap Value (Part 2): How to Reduce Risk + Improve Returns Learn how small-cap value stocks can reduce risk and improve returns, what criteria an investment needs to meet to be included in a portfolio, and why value investing isn't dead. Listen Now →

Favorite Charts (September 2024)

#1 - Rate Cuts and Market Performance

The biggest news this month (or this year) was the Fed's decision to cut rates by 0.50%.

While the market has mostly gone up since the announcement, you might be curious to know how the market has performed during previous rate-cutting cycles.

Since 1929, there have been 14 rate-cutting cycles.

Twelve of them (85%) resulted in a positive return one year after the first rate cut.

The two rate cutting cycles that created negative returns were the Tech Crash (2001) and the Great Financial Crisis (2007).

Make of that what you will, but I think it's fair to say that today's market environment is not reflective of either of those two instances.

#2 - What’s Next for the Fed?!

Beyond the stock market, the next most popular request has been for my opinion on the future of interest rates.

While you know that I steer clear of forecasting, I thought I'd share the current market expectations.

If the Fed Funds Futures are accurate (mind you, that's a big IF), then rates could drop down to about 4% by the end of this year and then below 2% by the end of 2025.

Again, I stress that these are forecasts which may or may not represent reality, so it will be interesting to see how things play out.

#3 - The Looming Recession

The constant drumbeat of the 2020s has been an expectation that the economy is doomed for a recession.

Not to spoil everybody's fun, but this is inevitably true, as the great Howard Marks has pointed out:

This is simply a fact of life and has been true throughout our investing lives.

But, historically, it's clear that recessions are not the end of the world for investors who have patience.

In any case, in light of the constant recession rhetoric, it's interesting to see that the data continues to be mostly positive, with none of the six recessionary indicators pointing to a recession as we speak.

#4 - Hiding Out in Cash Comes With a Cost

Given the recent spike in interest rates, many investors rushed to "invest" cash in money market funds over the past couple of years.

But at what cost?

It's not surprising that cash accounts have underperformed equities, though it is striking by how much!

What might be more surprising is that cash has underperformed bonds, an asset class that has struggled in recent years.

With rates now falling, one can only imagine what this chart will look like over the coming few years.

#5 - Don’t Get Political With Your Portfolio

Intuitively, we know that it's not wise to let our politics influence our portfolios.

But every four years, we're tempted to go against this advice.

If that's you right now, know that the data is quite clear as to just how poor that decision has proven to be over the long term.

As the chart below shows, being in the market is much more important to our returns than who is in the White House.

💥 BONUS - The Value of Extending Your Time Horizon

While the media spends most of their time discussing "volatility risk," there's a simple antidote available to all of us:

Historically speaking, the longer you own your portfolio, the less likely it is that you'll experience a negative return.

That might be stating the obvious, but you may be surprised to learn that over periods of just three years or longer...

...the historical probability of a positive return is 90% or higher.

In Summary

It's an interesting irony that as the market marches higher, many investors grow concerned that the new highs aren't sustainable.

As they say:

One could argue that the healthiest mental model for successful investing is to be pessimistic about the short-term but optimistic about the long-term, and then to plan accordingly.

If that seems odd given my perpetual optimism, think about the following quote from George Bernard Shaw through the lens of investing:

You could say that the art of financial and retirement planning is never letting one emotion overrun the other.

Stay wealthy,

Taylor Schulte, CFP®