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How to rebalance your portfolio for the second half of 2024

How to rebalance your portfolio for the second half of 2024
How to rebalance your portfolio for the second half of 2024

As Wall Street heads into the second half of the year, Lawrence Sprung, founder of Mitlin Financial and author of Financial Planning Made Personal, joins Wealth! to discuss market dynamics (^DJI,^GSPC, ^IXIC) and how they should influence your investment decisions.

Although past performance is not indicative of future performance, Sprung points out that in the past, when there was a strong first half of the year, the momentum continued for the rest of the year. He believes the election will be a catalyst, as it typically boosts market returns in an already strong year. He also explains that a potential rate cut could be another catalyst leading to higher returns.

He recommends that investors review their portfolios mid-year and rebalance if necessary. Financials have performed well in a higher interest rate environment and could collapse after a rate cut. The energy sector, meanwhile, is sensitive to geopolitical events, which Sprung explains as follows: “We cannot determine the timing, but we can try to predict them.”

Click here to watch the full episode of Wealth and learn more about expert insights and the latest market activity!

This article was written by Melanie Riehl

Video transcript

It’s a busy and not a busy week for Wall Street.

Monday marks the beginning of the third quarter and the second half of 2024. Stock prices have soared in the first half of 2024.

Enthusiasm for artificial intelligence is driving profits at major technology companies.

But the question concerns everyone.

Well, the good times are rolling.

Well, we have Lawrence Sprung here, founder of Midland Financial and author of Financial Planning, to talk about investment strategies for the second half of this year.

Larry, nice to have you here in the studio.

Of course, everyone knows the old saying: “Past performance is no guarantee of future results.”

So where can we expect some effectiveness for investors in trading, as we saw in the first half of the year?

And where do you think there might be room for improvement, expansion or new opportunities for the playbook?

Yeah, I mean, if you look back at past performance, it doesn’t necessarily mean we’re going to continue like that.

But if you look at history, when we have a first half like we just had, that usually continues all the time, and I think there are a couple of things that are going to take us even further in that direction. We have an election year, which usually – I know people worry about volatility – increases the market return, and usually there is good market performance in that year.

And we are also heading towards a possible interest rate cut.

These three things may actually lead us to higher returns.

And I think there are a lot of inherent clues that the areas that have brought us here can continue to do so into the second half of 2024.

So how can one position one’s portfolio in the face of such an overlap of upcoming events?

I think they need to be aware of what they own. And what’s happening now reminds me of the late ’90s when people on the internet had only a small portion of their portfolio in a certain area and then woke up and owned a large portion of it. That can’t happen.

You want to keep an eye on your allocation, take a look at it and know that this mid-year is a good time to take a look at the portfolio and rebalance it if necessary as I rethink my portfolio for the second half of the year.

And what I think about some of these events that we’re talking about is that there’s an event that you’re anticipating that could lead to a major repositioning of portfolios after the final event occurs, so almost a sell the news type event.

Yes, I think the interest rate situation is very important because financial stocks are doing very well at the moment due to the higher interest rate level.

I think as we start to focus on a lower interest rate environment, they could fall out of favor with investors just as they did in the first half of this year.

Certainly one of the areas that people continue to try to evaluate – even beyond AI and beyond the Fed’s actions – is what’s happening in the oil markets and how best to position their portfolio given what’s going on in the energy sector.

In one case, it’s seen as a tertiary AI strategy and in another case, it’s more dependent on geopolitical events that we can’t predict but we can try to anticipate. How do you see investors using this now?

I mean, most of the investors we work with are long-term in nature.

So you’re less concerned about day-to-day volatility, you know, energy is something that people are constantly thinking about and paying attention to.

And when you look at energy prices, people usually feel that when they look at the gas pump, energy prices immediately go up.

This is a bad thing.

The reality, however, is that consumption at the pump is increasing and that costs you more.

This is usually a support for a good economic environment.

Therefore, the overall picture is usually very positive.

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