To Washington Park Advisors Clients:

Enclosed please find your summary of Investment Results for the six months ending June 30, 2024.

As always, securities markets are impacted by recent economic and political activity. For the month of June 2024, and during the first three weeks of July, events were especially newsworthy. First, the President has decided not to run for a second four-year term and has endorsed his first-term vice presidential cohort, Kamala Harris, as the Democratic Party nominee. On the Republican side, Presidential candidate Donald Trump selected JD Vance of Ohio as his running mate.

Economically, it increasingly appears that the Federal Reserve will, in September, lower the Fed Funds rate by ¼ of 1%, as the Fed now expects that the higher levels of inflation that have been with us since 2021 are subsiding. We also expect the Fed’s cycle of lowering interest rates to begin in September and for rates to continue to come down through 2024 and into 2025. The Fed began increasing interest rates (tightening) in March of 2022 and raised rates 11 times over the next 16 months. While we do not predict the same amount of rate reduction (easing), we do feel the Fed will be careful and take some time until they settle on a neutral rate. 

The equity markets have responded to the Fed’s commentary by broadening out. No longer is the equity market being dominated by six or seven high tech companies getting a historically large percentage of investor dollars. Recently, the Russell 2000 small capitalization index has outperformed the very narrow leadership that has dominated the Nasdaq and S&P 500 indices over the last 18 months. Along with the Rusell 2000, the Dow Jones has shown increasing strength as the so called “magnificent seven,” have weakened. Historically, market periods in which a small number of highly valued companies contributed the majority of returns typically were followed by precipitous declines in those companies’ market capitalization. That includes 1929 and the ‘dot.com’ bubble in 2000. Earlier in 2024 there was a period where the twenty largest stocks made up 110% of the gains in the S&P 500, while the other 480 companies were a drag on the index. Further, headlines in the financial press have compared this cycle’s favorite, Nvidia, to Cisco Systems which saw Cisco’s valuation decline by over 80% as the ‘dot.com’ bubble collapsed in 2000.

At Washington Park, we have been rewarded by the ongoing transition. Recently investors have begun to find value in industries from industrials and financials to airlines, autos, energy stocks of all 

varieties, consumer products, and real estate. Our portfolios have seen appreciation as the lower valuations in those sectors have begun to be rewarded with higher prices. We expect this trend to continue as investors find value in most of our dividend paying companies.

Our fixed income portfolios have performed as we expected in 2022, 2023, and thus far in 2024. As you are aware our fixed income portfolios are of very short duration and are of the highest quality. Longer-term bonds since the beginning of 2022 have lost money, and the longer the durations the greater the loss. At some point as interest rates go down (as per the Fed’s plan), we will look to carefully extend the duration in our fixed income, especially if the yield curve steepens.

In summary, we anticipate there will be volatility in this election year, and we feel we are well positioned to take advantage of any volatility that does occur. Our cash and cash equivalents along with our short-duration bonds give us plenty of buying power as the equity markets present opportunities. 

In addition to our quarterly commentary, we are pleased to be able to offer you the use of our client portal. The client portal will give you an online view of your portfolio as well as the opportunity to receive all our communications, including your quarterly statements, online rather than in the mail. If you are interested in this option, please send an email to clientportal@waparkadvisors.com. 

If you have questions, please do not hesitate to call.

Warm regards,

Washington Park Advisors