As we delve into 2024, a critical presidential election year, it becomes paramount to understand the profound impact this period may have on our investment strategies. The Strategic Wealth Alpha GPS™ (SWAG) Retirement Roadmap, coupled with our robust Private Market Alpha (PMA) investments, are designed to navigate these dynamic times by focusing on long-term growth and resilience against market fluctuations.

Jerome Powell’s Dovish Stance Fuels Market Optimism

Jerome Powell’s recent address following the Federal Open Market Committee (FOMC) meeting offered a more dovish perspective than anticipated. While acknowledging the slow progress on inflation, the announcement of a reduction in Quantitative Tightening (QT) was well-received. Starting in June, the reduction in Treasury securities will decrease from $60 billion to $25 billion per month, while agency debt and mortgage-backed securities redemptions will remain capped at $35 billion.

This policy shift signals suggests a reduction in Treasury issuances by $105 billion in Q3. The bond market reacted positively to this news, anticipating lower yields and eased economic financing pressures in the coming months. This move also supported a robust finish to the week on the stock market, propelled further by Apple’s announcement of a massive $110 billion stock buyback program.

Stagflation: Myth vs. Reality

Recently, the term ‘stagflation’ has resurfaced in financial discussions, positing a scenario where slow economic growth meets high unemployment and inflation. However, current economic indicators—such as above-trend growth, falling inflation rates, and low unemployment—suggest that true stagflation is not occurring.

Moreover, the Quarterly Personal Consumption Expenditures (PCE) price index compared with GDP growth paints a nuanced picture. Despite recent increases in the PCE index raising alarms, a long-term view using a 12-month average shows a stable correlation between the PCE index, Consumer Price Index (CPI), and GDP, signaling that short-term fluctuations should not be over-interpreted as signs of stagflation.

Understanding Market Dynamics in Election Years

Historical analysis of stock market returns during U.S. presidential election years reveals a typical pattern: despite common mid-year dips, markets generally rally toward the year-end. This pattern is supported by the resilience shown in over 80% of election years since 1925, where the S&P 500 demonstrated an average return of 11.4%. These insights are crucial as they underscore the potential for growth amidst political transitions, aligning with the strategic, long-term focus of the SWAG Retirement Roadmap.

Unlocking the Financial Maze: Rising Rates, Treasury Blunders, and the Power of Private Market Alpha

The current economic climate presents a challenging maze: growth is lackluster, insufficient to warrant lowering interest rates, yet inflation is alarmingly high. Policymakers are in a precarious position, choosing between maintaining current rates or incrementally raising them to temper inflation. This intricate balancing act is highlighted by the critique from hedge fund titan Stanley Druckenmiller, who lambasted Treasury Secretary Janet Yellen for what he termed “the biggest blunder in the history of the Treasury.” Druckenmiller pointed out that Yellen missed a critical opportunity to issue long-dated Treasury bonds when rates were near zero during the COVID-19 crisis. Looking ahead, by 2033, interest expenses might rise to 4.5% of GDP, and by 2043, to 7%—which would account for 144% of all current discretionary spending.

The Bond Market’s Liquidity Gap and Impending Challenges The U.S. government’s strategy to increase long-term borrowing is set to exceed the current demand for bonds, creating a significant liquidity gap. This shift necessitates bonds to offer a yield of at least 5.5%, especially critical as central banks scale back their bond purchases. This scenario, driven by a shift from short-term T-bills to long-term bonds, reveals the unsustainability of the current strategy, leaving a gap for the private sector to fill.

Private Market Alpha: Building a Bulletproof Portfolio In this intricate financial landscape, Private Market Alpha investments stand out as a key strategy for constructing a resilient portfolio. These investments provide returns uncorrelated with the volatile public markets, essential for hedging against market uncertainties. Notably:

1. BREIT (Blackstone Real Estate Income Trust):
   • BREIT focuses on real estate investments and has delivered strong long-term returns since its inception in 2017.
   • With a portfolio consisting of real estate investments and real estate debt investments, BREIT boasts a $59B net asset value (NAV) and a $113B total asset value.
   • Its performance as of March 31, 2024, indicates a 10.8% return since inception and a 4.7% annualized distribution rate.
2. BCRED (Blackstone Private Credit):
   • BCRED provides access to Blackstone Private Credit fund offers floating-rate, senior secured loans to large, performing companies.
   • It emphasizes capital protection and aims to provide high current income.
   • Key metrics include a 10.4% ITD total return and a 10.3% annualized distribution rate. A 14.5% return in 2023 when most bonds and income funds got decimated with rising interest rates.
   • BCRED’s portfolio has broad exposure to over 500 quality companies across 50+ sectors.
3. Apollo Approach (Private Equity Solutions by Apollo Global Management):
   • Apollo Private Equity Funds have delivered a net internal rate of return (IRR) of 22% since inception, showcasing convincing performance. These funds offer flexible mandates, seeking attractive opportunities across transaction types, industries, and geographies. With a focus on value orientation and capital preservation, Apollo employs a creative sourcing engine to identify opportunities and actively manages portfolios post-acquisition to drive growth.
   • Deployment and realizations have been robust, with Fund X committing approximately $3.5 billion across three transactions. Fund IX is nearly fully invested or committed and has returned over $8 billion, totaling 40% of invested cost to date. Despite uncertainties, Apollo’s long-tenured investment team and strong firm culture position it well to navigate market volatility.
   • With $108B in assets under management (AUM), Apollo has over 260 investment professionals and has invested in 250+ portfolio companies since inception.
   • Apollo emphasizes its expertise in driving measurable, positive change and enhancing value creation through ESG practices.
4. CNL Strategic Capital:
   • CNL Strategic Capital offers private investment opportunities aimed at long-term growth and monthly income.
   • It focuses on providing capital to private companies and emphasizes a risk-mitigated approach.
   • CNL Strategic Capital’s Class I shares have shown an average annual return of 12.8% since inception, pays a dividend of 3.6%, providing potential benefits such as no capital calls and a 40-year strategy.

Comparative Analysis: Private Market Alpha vs. Traditional Investments In today’s uncertain market environment, investors seek stability and growth opportunities amidst fluctuating interest rates and economic conditions. While traditional investments like Treasury bonds offer perceived safety, recent years have shown significant volatility, as evidenced by the performance of the iShares 20+ Year Treasury Bond ETF (TLT).

 TLT’s recent performance:

2021: -4.60%

2022: -31.24%

2023: 2.77%

2024 YTD (as of 5/3/24): -7.95%

This rollercoaster ride underscores the need for alternative strategies that can provide more stable returns over the long term. Private Market Alpha solutions offer several advantages:

• Diversification: Private investments are often uncorrelated with the broader public markets, providing a hedge against market volatility.
• Stability: Private Market Alpha investments like BCRED and BREIT focus on generating stable income, which is particularly appealing in an environment where traditional fixed-income products are failing to provide secure, predictable returns.
• Potential for Higher Returns: While traditional bonds and equities face headwinds from rising interest rates and economic uncertainty, Private Market Alpha solutions like Apollo Private Equity and CNL Strategic Capital can potentially offer higher yields and appreciation, driven by strategic asset management and sector-specific expertise.

 Strategic Wealth Alpha GPS (SWAG) Planning Process:

At Advanced Wealth Management, we understand the importance of navigating market volatility while pursuing our clients’ financial goals. Through our trademarked Boutique Family Office approach and science-based SWAG Planning Process, we offer comprehensive wealth management solutions tailored to each client’s unique needs and objectives.

Conclusion: Navigating Through 2024 with Strategic Insights

As we progress through the election year with the guidance of the SWAG Retirement Roadmap and supported by Private Market Alpha investments, we are well-equipped to handle potential market fluctuations. Our investment strategies are designed to leverage both historical market trends and contemporary economic analyses, allowing us to make informed decisions that facilitate long-term wealth growth.

Knowledge is Power!

Understanding the intricacies of the economy, markets, and broader financial policies is essential—not just for staying informed but for taking control of your financial future. Knowledge equips you with the tools to make strategic decisions, optimize your financial outcomes, and achieve the financial freedom that aligns with your life goals.

How Can We Help You?

At Advanced Wealth Management, we deliver proactive, comprehensive, and compassionate advice to individuals, organizations, and families. Our personalized solutions are tailored to meet the unique needs of each client, offering a sense of security and peace of mind.

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Explore our customized, globally diversified, tax-efficient investment portfolios designed to align with your financial plan and withstand the test of time. Our differentiated approach to traditional asset management actively repositions portfolios to mitigate risks and seize market opportunities. Utilizing our Intelligent Allocation® technology, we dynamically adjust to meet clients’ evolving needs in a fluctuating market environment, ensuring our strategies are data-driven and consistently add value.

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Discover innovative tax strategies designed to help you defer, reduce, and better manage your tax liabilities, with a particular focus on retirement and distribution phase planning to maximize your financial efficiency.

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Content Disclosure:
The information provided here is general in nature and has been prepared solely for informational and educational purposes. It does not constitute an offer or recommendation to buy or sell any particular security or to adopt any specific investment strategy. It is not a substitute for professional accounting, legal, tax, insurance, or investment advice. While we believe the information shared is accurate and reliable, we do not guarantee its completeness or precision. The insights may include forecasts, opinions, and discussions about economic conditions, market scenarios, or investment strategies, which are subject to change. There is no assurance these insights will prove accurate. 

Disclaimer: This information is general and educational. It’s not a substitute for professional advice.