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How to Make the Most of Your Golden Years

Understanding and Navigating the 4 Phases of Retirement from Dr. Riley Moynes

Executive Summary:

  • Retirement involves significant financial and emotional transitions, impacting routines, identity, and purpose.
  • Dr. Riley Moynes’ framework of four phases helps retirees navigate these changes: the vacation phase, the loss and lost phase, the trial and error phase, and the reinvent and rewire phase.
  • Addressing emotional challenges is crucial to avoid depression and find fulfillment in retirement.
  • Engaging in meaningful activities and serving others can lead to a rewarding and purpose-driven retirement.
  • Lastly, understanding these phases and staying proactive ensures retirees can make the most of their golden years.

Retirement is one of the biggest financial transitions of your life, so many prepare for years or even decades in advance. 

From maximizing workplace retirement plans to optimizing Social Security benefits timing, retirees-to-be invest significant time understanding the financial nuances and tradeoffs needed for a secure and lasting retirement.

But, while many prepare financially, few consider the non-financial side of retirement, specifically, the emotional and psychological transition they will experience in retirement. 

And that can be hard, because the reality is that leaving behind your career, whether you were financially ready or not, can create significant challenges, ultimately leading to higher rates of divorce and depression among retirees.

Fortunately, just like you can prepare for the financial aspects of retirement, there are things you can do to smooth out the emotional and psychological ride into retirement, helping you to “squeeze all the juice out of retirement.” 

In his book, “The Four Phases of Retirement: What to Expect When You’re Retiring” and viral Ted Talk, Dr. Riley Moynes presents a framework to help retirees understand and navigate this significant life event through the 4 Phases of Retirement, which we will explore below.

The 4 Phases of Retirement from Dr. Riley Moynes

Phase 1: The Vacation Phase

The first phase of retirement is the vacation phase – a time when you enjoy your newfound freedom.

Just like being on vacation, you can wake up whenever you want and spend your time however you want – pure bliss, right? Well, just like being on vacation, there often comes a point where you’re ready to go back home, settle into your routines, and “sleep in your own bed again.”

In other words, the new, fun, and exciting feeling of being able to do anything at any time wears off, and you’re left to wonder: is this all there is? 

According to Dr. Riley Moynes, the vacation phase of retirement typically lasts a year before it starts to lose its luster. He says that once you find yourself questioning if this is all there is, you have officially moved on to phase 2. 

Phase 2: Loss and Lost

As the name implies, phase 2 is not a fun place to be, and in his Ted Talk, Dr. Moynes describes it for many as “feeling like getting hit by a bus.”

In this phase, retirees can experience 5 major losses:

The 5 Major Losses in Retirement

  1. Loss of Routine: While work provides structure and routine, the newfound freedom of retirement can be unsettling for many.
  1. Loss of Identity: Many people intertwine their identity with their work, often defining themselves by their job (e.g., “I am a doctor” or “I am an accountant”).
  1. Loss of Relationships: Strong career relationships built over decades can suffer as you no longer interact with colleagues daily.
  1. Loss of Purpose: Many derive their sense of purpose from their work, especially those who feel they are doing their life’s work.
  1. Loss of Power: Retirees often lose the power and influence they once had as key decision-makers in their careers.

Ultimately, these major losses can lead to what Dr. Moynes refers to as the 3 D’s: depression, divorce, and cognitive decline. This period can be incredibly challenging as retirees struggle to find a new sense of purpose and direction without the familiar structure of their careers. Many may feel isolated and uncertain about how to move forward, which can exacerbate these feelings of loss.

Fortunately, by the time retirees decide they can’t go on like this, they have officially entered phase 3: trial and error.

Phase 3: Trial & Error

Phase 3 is all about throwing things at the wall to see what sticks.

It’s a time when retirees ask themselves a couple of powerful questions: 

  1. How can I make my life meaningful again?
  2. How can I contribute?

Dr. Moyne’s advice is simple: do more of the things you love and the things you’re good at. 

And he says if you are having trouble figuring out what that is, start with some reflection. Ask yourself: a) what are some of your greatest accomplishments and b) what do you love doing? 

Where those two things overlap is where you should focus your time. 

Remember, this phase is all about experimenting and finding what brings you joy and fulfillment. Interested in volunteering at your local community garden or library? Go ahead and give it a try. 

And if you’re struggling to come up with ideas, here are ten activities to consider during retirement:

10 Ideas to Find Purpose in Retirement

  1. Volunteering: Engage in volunteer work at local non-profits, schools, hospitals, or community gardens. Volunteering allows you to give back to the community, meet new people, and find a sense of fulfillment.
  1. Mentorship: Offer your expertise and experience to mentor younger professionals in your previous field or other areas of interest. This can be done through formal programs or informal networks.
  1. Lifelong Learning: Enroll in classes at local community colleges or online platforms. You can study subjects that interest you, ranging from history and literature to science and technology.
  1. Hobbies and Crafts: Dive deeper into hobbies you’ve always enjoyed or pick up new ones. Whether it’s painting, woodworking, gardening, or cooking, engaging in creative activities can be very fulfilling.
  1. Fitness and Wellness: Focus on maintaining your physical health through activities like yoga, swimming, hiking, or joining a fitness group. This can also include mental wellness practices like meditation or mindfulness.
  1. Travel and Exploration: If you enjoy traveling, consider planning trips to places you’ve always wanted to visit. Travel can broaden your horizons and provide new experiences and memories.
  1. Writing and Blogging: Share your life experiences, knowledge, or interests through writing. Start a blog, write a memoir, or even work on a novel. This can be a great outlet for self-expression.
  1. Part-Time Work: Find part-time work or freelance opportunities in areas you’re passionate about. This can help maintain a sense of structure and purpose while allowing you to use your skills.
  1. Community Involvement: Get involved in local community groups or organizations. This can include joining clubs, attending town meetings, or participating in community events.
  1. Family and Friends: Spend quality time with family and friends. Strengthen your relationships by organizing regular get-togethers, outings, or family vacations. Being an active part of your loved ones’ lives can bring immense joy and fulfillment.

Phase 3 is all about experimenting with different activities until you find what brings you joy. Remember, this process is unique for everyone—there is no right or wrong—and it can continue to evolve throughout retirement

Last but not least, on to Phase 4: Reinvent and Rewire.

Phase 4: Reinvent & Rewire

In phase 4, retirees find answers to the most important question of them all: what’s the point?

But, in Dr. Moynes’ experience, not everyone makes it to phase 4, with some retirees bouncing back and forth between phases 2 and 3. But, for those that do, he finds that it almost always involves service to others, in some capacity. 

This could involve giving back to your community through volunteer work or mentorship. In his TED Talk, Dr. Moynes mentions a retiree who found joy in delivering “piping hot pizzas to hungry humans” part-time, not for the money, but for the satisfaction of serving others.”

For Dr. Moynes, success in phase 4 came through a friendship he formed that evolved into community classes teaching other friends how to use their iPhones and iPads. He joked that it all started because he and his fellow retirees were all given various Apple products for Christmas from their kids, but half of them could barely figure out how to turn them on, let alone use them. So, he and a friend taught a class on how to use their devices that snowballed into hundreds of classes on a variety of subjects over the years: from how to repair bikes, to learning different languages. 

The best part of all? Dr. Moynes has found that through Phase 4, retirees can recover many of the losses from Phase 2: routine, identity, relationships, purpose, and power. This phase not only helps retirees regain a sense of stability but can also bring renewed meaning and satisfaction to their lives.

So, knowing what you know now, where do you go from here? 

Dr. Moynes’ advice is simple:

Here Are 4 Steps You Can Take to “Squeeze the Most Juice” out of Retirement

  1. Enjoy the vacation in phase 1.
  2. Be prepared for the losses in phase 2.
  3. Try as many different things as possible in phase 3.
  4. And lastly, squeeze all the juice out of retirement in phase 4. 

In the end, with 10,000 people hitting retirement age every day and retirement potentially lasting a third of their life: a) you are not alone and b) this is a problem worth solving. 

By understanding and embracing these four phases, you can turn the challenges of retirement into opportunities for growth, fulfillment, and happiness. Whether you are just beginning your retirement journey or are already navigating its complexities, remember that each phase is a step towards a richer, more rewarding life. The key is to stay open, flexible, and proactive in finding what makes your retirement truly golden.

Albion Financial Group is an SEC registered investment advisor. The information provided is intended solely for educational purposes and should not be construed as an offer or solicitation for the purchase or sale of any particular securities product, service, or investment strategy. Past performance is not indicative of future performance. Additional information about Albion Financial Group is also available on the SEC’s website at www.adviserinfo.sec.gov under CRD number 105957. Albion Financial Group only transacts business in states where it is properly registered, notice filed or excluded or exempted from registration or notice filing requirements.

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Weekly Market Recap – August 2, 2024


Weekly Market Recap – August 2, 2024 [PDF]Download

Weekly Recap:

Weak labor market data on Thursday and Friday of last week heightened fears regarding the condition of the US economy, turning what had been a rotation trade into a fear trade. Equities of all stripes were down sharply as VIX spiked to its highest level in more than a year. Defensive sectors like utilities, staples, and real estate outperformed on the week, while most growth and cyclicals companies were lower. Small caps reversed course on their recent outperformance and shed nearly 7% on the week, significantly underperforming large caps.

With some market participants suddenly clamoring for an emergency rate cut, Treasury yields fell sharply as bond prices rose. 2y yields dropped 50bp on the week, 10y yields finished 40bp lower, and Fed funds futures markets finished Friday’s session with 4 to 5 rate cuts priced in by year-end. Credit spreads leaked wider by about 10 basis points, a comparatively modest amount that could be a precursor of more widening to come.

The data driving the equity selloff largely came from the labor market, although a weaker-than-expected ISM Manufacturing print also contributed, coming in at 46.8 for July. On the labor front, initial jobless claims (a leading indicator of labor market stress) rose to 249k, the highest figure in nearly a year. Then on Friday, nonfarm payrolls fell to +114k in July from a downwardly revised +179k in June, missing consensus by a wide margin. Perhaps most importantly, U-3 unemployment rose 20 basis points to 4.3%, officially triggering the “Sahm Rule” (trailing 3m avg U3 more than 50bp greater than trailing 12m low U3) which in the past has proven to be a very reliable real-time marker for the actual start of a US recession (recession dates are officially determined after the fact by NBER).

Chart of the Week: US Unemployment Rate (U-3)

Albion’s “Four Pillars”:

Economy & Earnings

The US economy has been resilient despite the higher interest rate environment. Analysts are forecasting low double digit EPS growth in 2024; growth of that magnitude will depend on the economy avoiding recession.

Valuation

The S&P 500’s forward P/E of 21x is well above the long run average, so valuations are likely to be a headwind to future returns. More predictive metrics like CAPE, Tobin’s Q, and the Buffett Indicator (Eq Mkt Cap / GDP) suggest that compound annual returns from current levels over the coming decade are likely to be in the single digits.

Interest Rates

Futures markets imply that the Fed will cut overnight interest rates once or twice in the 2nd half of 2024, with additional cuts in 2025. Belly and long end rates have already priced in a rate cutting cycle and are likely near their post-pandemic equilibrium levels, unless the US economy enters a recession.

Inflation

After falling rapidly in late 2022 and all of 2023, inflation became sticky in the ~3% range in the first half of 2024. Services inflation remains somewhat elevated, in part due to heavily lagged shelter costs. Volatile energy prices driven by geopolitical conflicts could present a risk to the inflation outlook.

Albion Financial Group is an SEC registered investment advisor. The information provided is intended solely for educational purposes and should not be construed as an offer or solicitation for the purchase or sale of any particular securities product, service, or investment strategy. Past performance is not indicative of future performance. Additional information about Albion Financial Group is also available on the SEC’s website at www.adviserinfo.sec.gov under CRD number 105957. Albion Financial Group only transacts business in states where it is properly registered, notice filed or excluded or exempted from registration or notice filing requirements.

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Weekly Market Recap – July 26, 2024

Weekly Market Recap – July 26, 2024 [PDF]Download

Weekly Recap:

The sector rotation trade gained momentum last week, as large cap tech significantly underperformed while most other parts of the US equity market rallied. Cyclicals and defensives were almost universally higher, with energy stocks the lone exception thanks to sagging oil prices driven by soft demand from China. Small caps massively outperformed once again, with the Russell 2000 climbing 3.5% on the week to reach 10+% so far in July. International markets finished lower, particularly E/M thanks to weakness in Chinese stocks.

In fixed income, rates moved lower across most of the curve, particularly in the front end as monthly PCE data reinforced the disinflation narrative. Dovish comments from former FOMC member Bill Dudley, who surprisingly called for a July rate cut to stave off a possible recession, also helped push short rates lower. While futures markets continue to price almost no chance of a cut from the FOMC at the end of July, the implied odds of a September cut are now virtually 100%.

Macro data released last week was consistent with recent trends. The first estimate of Q2 US GDP growth came in at +2.8% (q/q annualized), with better-than-expected personal consumption (along with some inventory build) as strong income growth continues to support consumer spending. Home sales (new & existing) remain weak due to persistently high mortgage rates. The preliminary reading of S&P’s PMIs for July saw manufacturing (49.5) slip back into contraction, while services (56.0) exceeded consensus and kept the composite (55.0) in expansion territory. And finally, Core PCE (the Fed’s preferred inflation gauge) was +0.2% m/m in June and +2.6% y/y, a relief to market participants who are wary of any reacceleration in inflation ahead of the September FOMC meeting.

Chart of the Week: US GDP Growth with Consensus Fwd Estimates (q/q, ann.)

Albion’s “Four Pillars”:

Economy & Earnings

The US economy has been resilient despite the higher interest rate environment. Analysts are forecasting low double digit EPS growth in 2024; growth of that magnitude will depend on the economy avoiding recession.

Valuation

The S&P 500’s forward P/E of 21x is well above the long run average, so valuations are likely to be a headwind to future returns. More predictive metrics like CAPE, Tobin’s Q, and the Buffett Indicator (Eq Mkt Cap / GDP) suggest that compound annual returns from current levels over the coming decade are likely to be in the single digits.

Interest Rates

Futures markets imply that the Fed will cut overnight interest rates once or twice in the 2nd half of 2024, with additional cuts in 2025. Belly and long end rates have already priced in a rate cutting cycle and are likely near their post-pandemic equilibrium levels, unless the US economy enters a recession.

Inflation

After falling rapidly in late 2022 and all of 2023, inflation became sticky in the ~3% range in the first half of 2024. Services inflation remains somewhat elevated, in part due to heavily lagged shelter costs. Volatile energy prices driven by geopolitical conflicts could present a risk to the inflation outlook.

Albion Financial Group is an SEC registered investment advisor. The information provided is intended solely for educational purposes and should not be construed as an offer or solicitation for the purchase or sale of any particular securities product, service, or investment strategy. Past performance is not indicative of future performance. Additional information about Albion Financial Group is also available on the SEC’s website at www.adviserinfo.sec.gov under CRD number 105957. Albion Financial Group only transacts business in states where it is properly registered, notice filed or excluded or exempted from registration or notice filing requirements.

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Weekly Market Recap – July 19, 2024

Weekly Market Recap – July 19, 2024 [PDF]Download

Weekly Recap:

A sharp sector rotation trade played out across US equity markets for a second consecutive week, with high flying tech stocks coming under selling pressure while previously unloved areas of the market found a bid. Cyclicals, real estate, and small caps were areas of relative strength. The Dow was the winner among US large cap benchmarks, while the Nasdaq was down more than 3% and is now slightly in the red for the month of July. Meanwhile, international equity markets had a challenging week, and remain well behind the US on a YTD basis.

Bond yields moved higher by 5-6 basis points across most of the Treasury curve, pivoting midweek after a fairly strong bond rally that had seen yields fall by ~25 basis points over the previous 2+ weeks.

Macro was a mixed bag last week. Import/export prices continue to suggest that international trade is not a significant source of inflation at this point. On the positive side, retail sales in June were better than expected, and housing activity rebounded slightly, with permits and starts both up 3+% sequentially. On a more challenging note, jobless claims ticked higher once again as the labor market continues to normalize, and the Conference Board’s Leading Economic Index (LEI) fell another 0.2% m/m. The LEI is now 14.8% off of its peak from the end of 2021, and in the past, declines of this magnitude have always been followed by a US recession. See the Chart of the Week for a time series.

Lastly, despite causing significant disruption in many industries, it does not appear that Friday’s global Crowdstrike outage had any meaningful effect on most financial asset prices (CRWD is a notable exception, of course).

Chart of the Week: Conference Board LEI – Decline from Peak (%)

Albion’s “Four Pillars”:

Economy & Earnings

The US economy has been resilient despite the higher interest rate environment. Analysts are forecasting low double digit EPS growth in 2024; growth of that magnitude will depend on the economy avoiding recession.

Valuation

The S&P 500’s forward P/E of 21x is well above the long run average, so valuations are likely to be a headwind to future returns. More predictive metrics like CAPE, Tobin’s Q, and the Buffett Indicator (Eq Mkt Cap / GDP) suggest that compound annual returns from current levels over the coming decade are likely to be in the single digits.

Interest Rates

Futures markets imply that the Fed will cut overnight interest rates once or twice in the 2nd half of 2024, with additional cuts in 2025. Belly and long end rates are already at or near what are likely to be their post-pandemic equilibrium levels, unless the US economy enters a recession.

Inflation

After falling rapidly in late 2022 and all of 2023, inflation became sticky in the ~3% range in the first half of 2024. Services inflation remains somewhat elevated, in part due to heavily lagged shelter costs. Volatile energy prices driven by geopolitical conflicts could present a risk to the inflation outlook.

Albion Financial Group is an SEC registered investment advisor. The information provided is intended solely for educational purposes and should not be construed as an offer or solicitation for the purchase or sale of any particular securities product, service, or investment strategy. Past performance is not indicative of future performance. Additional information about Albion Financial Group is also available on the SEC’s website at www.adviserinfo.sec.gov under CRD number 105957. Albion Financial Group only transacts business in states where it is properly registered, notice filed or excluded or exempted from registration or notice filing requirements.

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Conference Call Recording – July 2024

Albion Financial Group – July 2024 Conference Call Video Recording

In our July 2024 conference call our panelists discussed the following topics:

  • General views on the economy
  • Current state of inflation and our outlook
  • The jobs market and recent trends
  • The Fed, interest rates, and bond yields
  • Present conditions in the stock market, including the concentration of returns
  • 2024 presidential election and its potential impact on markets
  • Sunsetting tax laws
  • Social Security planning considerations
  • Downsizing during retirement
  • Portfolio management concepts and asset allocation

Stream the audio of yesterday’s conference call at this link.

Albion Financial Group is an SEC registered investment advisor. The information provided is intended solely for educational purposes and should not be construed as an offer or solicitation for the purchase or sale of any particular securities product, service, or investment strategy. Past performance is not indicative of future performance. Additional information about Albion Financial Group is also available on the SEC’s website at www.adviserinfo.sec.gov under CRD number 105957. Albion Financial Group only transacts business in states where it is properly registered, notice filed or excluded or exempted from registration or notice filing requirements.

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Weekly Market Recap – July 12, 2024

Weekly Market Recap – July 23, 2024 [PDF]Download

Weekly Recap:

Unlike the first week of July, which was largely a continuation of the tech-dominated rally of the past ~18 months, last week saw a broadening of the rally to include previously unloved sectors like cyclicals, real estate, and small caps. Among large cap benchmarks the Dow was the best performer, but the real star was the Russell 2000 (small cap benchmark) which surged 6% on the week. That said, the Dow and the Russell both remain far behind the more tech-heavy S&P 500 and especially the Nasdaq on a YTD basis.

The primary catalyst was Thursday’s lower-than-expected CPI print, which saw headline inflation drop 30 basis points sequentially to 3.0% y/y, while core inflation fell 10 basis points to 3.3%. The decline in Core CPI was largely driven by declining services inflation, rather than core goods which has already been in deflation for some time. Core services is the primary driver of inflation in the economy at this point, so seeing the moderating trend there is encouraging.

Earlier in the week, during his semi-annual 2-day testimony before Congress, Fed Chair Jerome Powell highlighted the fact that inflation is no longer the only risk on the committee’s mind, as the gradual normalization of the labor market has led to three consecutive sequential increases in U-3 unemployment, to 4.1% as of the most recent print. Financial markets interpreted Powell’s comments to mean that a September rate cut is in play, and the subsequent CPI print sent the implied odds of a September cut to nearly 100%. Rates fell across the curve as well, driving solid gains for fixed income investors on the week.

Chart of the Week: Consumer Price Index by Component (y/y change)

Albion’s “Four Pillars”:

Economy & Earnings

The US economy has been resilient despite the higher interest rate environment. Analysts are forecasting low double digit EPS growth in 2024; growth of that magnitude will depend on the economy avoiding recession.

Valuation

The S&P 500’s forward P/E of 21x is well above the long run average, so valuations are likely to be a headwind to future returns. More predictive metrics like CAPE, Tobin’s Q, and the Buffett Indicator (Eq Mkt Cap / GDP) suggest that compound annual returns from current levels over the coming decade are likely to be in the single digits.

Interest Rates

Futures markets imply that the Fed will cut overnight interest rates once or twice in the 2nd half of 2024, with additional cuts in 2025. Belly and long end rates are already at or near what are likely to be their post-pandemic equilibrium levels, unless the US economy enters a recession.

Inflation

After falling rapidly in late 2022 and all of 2023, inflation became sticky in the 3-4% range in the first half of 2024. Services inflation remains somewhat elevated, in part due to heavily lagged shelter costs. Volatile energy prices driven by geopolitical conflicts could present a risk to the inflation outlook.

Albion Financial Group is an SEC registered investment advisor. The information provided is intended solely for educational purposes and should not be construed as an offer or solicitation for the purchase or sale of any particular securities product, service, or investment strategy. Past performance is not indicative of future performance. Additional information about Albion Financial Group is also available on the SEC’s website at www.adviserinfo.sec.gov under CRD number 105957. Albion Financial Group only transacts business in states where it is properly registered, notice filed or excluded or exempted from registration or notice filing requirements.

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Weekly Market Recap – July 5, 2024

Weekly Market Recap – July 5, 2024 [PDF]Download

Weekly Recap:

The first week of the second half of 2024 was largely a continuation of what has been the dominant trend of the past 18 months, with technology stocks pulling large cap benchmarks higher while other parts of the market were mixed. The S&P 500 gained 2% on the week, despite the fact that 56% of the index constituents (281 out of 503 stocks) finished lower. Meanwhile, the tech-dominated Nasdaq (+3.5% on the week) continued to pull ahead in the 2024 performance race, while the more cyclical Dow (+0.7% on the week and just +5.5% YTD including dividends) lags far behind. Similarly, US small and midcap benchmarks (which are not nearly as tech-heavy as large caps) finished lower on the week, and have also meaningfully underperformed on a YTD basis.

Rates finished lower across the curve last week thanks to so softer-than-expected macro data, allowing bond prices to rise. Despite the holiday it was a busy week for macro, including below-consensus prints for both manufacturing and services activity in the month of June:

* ISM’s Manufacturing PMI slid deeper into contraction territory at 48.5

* ISM’s Services PMI fell into contraction at 48.8 (lowest print since May of 2020)

The week concluded with the monthly jobs report from the BLS, which showed steady growth in both jobs (+206k NFP) and hourly earnings (+3.9% y/y). Labor force participation ticked higher to 62.6%. Perhaps most importantly, the closely-watched U-3 unemployment rate rose 10bp sequentially to 4.1%. Despite rising sequentially for the 3rd straight month, U-3 remains slightly below the level that would trigger the Sahm Rule and potentially indicate the start of a US recession.

Chart of the Week: Nonfarm Payrolls (m/m net change)

Albion’s “Four Pillars”:

Economy & Earnings

The US economy has been resilient despite the higher interest rate environment. Analysts are forecasting low double digit EPS growth in 2024; growth of that magnitude will depend on the economy avoiding recession.

Valuation

The S&P 500’s forward P/E of 21x is well above the long run average, so valuations are likely to be a headwind to future returns. More predictive metrics like CAPE, Tobin’s Q, and the Buffett Indicator (Eq Mkt Cap / GDP) suggest that compound annual returns from current levels over the coming decade are likely to be in the single digits.

Interest Rates

Futures markets imply that the Fed will cut overnight interest rates once or twice in 2024, most likely at some point in the 2nd half of the year. Belly and long end rates are already at or near what are likely to be their post-pandemic equilibrium levels, unless the US economy enters a recession.

Inflation

After falling rapidly in late 2022 and all of 2023, inflation has become sticky in the 3-4% range in early 2024. Services inflation remains somewhat elevated, in part due to heavily lagged shelter costs. Volatile energy prices driven by geopolitical conflicts could present a risk to the inflation outlook.

Albion Financial Group is an SEC registered investment advisor. The information provided is intended solely for educational purposes and should not be construed as an offer or solicitation for the purchase or sale of any particular securities product, service, or investment strategy. Past performance is not indicative of future performance. Additional information about Albion Financial Group is also available on the SEC’s website at www.adviserinfo.sec.gov under CRD number 105957. Albion Financial Group only transacts business in states where it is properly registered, notice filed or excluded or exempted from registration or notice filing requirements.

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Quarterly Letter Excerpt: From John Bird’s Desk

As Albion grows and matures – and we’re now in the early years of our fifth decade – it’s inevitable that we find ourselves celebrating the retirement of long-time team members, honoring their contributions, yet continuing into the future without disruption. We’ve had a few over the years and it’s time to celebrate another. Doug Wells, Partner and head of business development, will be retiring in early July. Doug reached out to Albion in the 1990’s when he was looking for financial planning advice. He liked what he saw. Several years later, in 2002, Doug came back and pitched Toby and me on why we should hire him. Those of you who know him know he can be persuasive! We brought him into Albion and never looked back. His desire to learn was immediately apparent and within a few years had earned, in addition to his MBA, the CFP (Certified Financial Planner) and CFA (Chartered Financial Analyst) designations. He helped us along our path of continuous improvement where we strive to add more value to everything we do on behalf of clients. And he worked to get the word out into our community about Albion. Over the years he turned his network of business associates into a group of lifelong friends. From being a ski instructor at Deer Valley, hosting a radio show on KPCW, trying Bikram Yoga, or organizing group mountain bike rides, Doug has never shied away from trying new things. And with that spirit, he is trying a new chapter in his life, that of retirement.

He has helped scores of Albion clients make the decision to retire. More often than not the decision is far more personal than financial; it can be difficult to leave what you’ve known for decades and step off into the unknown. Having successfully counseled people through the transition he knew it was time to follow his own advice.

We will miss Doug. His energy, upbeat attitude, and intelligence are all characteristics we knew we could depend on. But we also know he leaves behind a highly functioning team that is already filling the void he leaves behind. Thank you, Doug, for choosing Albion!

Note: This blog post is an excerpt from Albion’s Quarterly Letter to clients. Find the entire letter posted in the Learning Center of this website.

Albion Financial Group is an SEC registered investment advisor. The information provided is intended solely for educational purposes and should not be construed as an offer or solicitation for the purchase or sale of any particular securities product, service, or investment strategy. Past performance is not indicative of future performance. Additional information about Albion Financial Group is also available on the SEC’s website at www.adviserinfo.sec.gov under CRD number 105957. Albion Financial Group only transacts business in states where it is properly registered, notice filed or excluded or exempted from registration or notice filing requirements.

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Market Recap – Q2 2024

Q2 2024 Market Recap (FINAL)Download

Q2 Recap:

Inflation

After several hotter-than-expected inflation prints in Q1, the data released in Q2 suggest that price pressures began to cool a bit. The m/m increase in Core CPI and Core PCE fell sequentially in both April and May, leaving Core CPI at +3.4% y/y and Core PCE at +2.6% y/y. Substantially all of the remaining inflation in the economy is in core services. Food and energy inflation are roughly +0.5% y/y combined as of the end of Q2, while core goods inflation is actually negative (i.e., deflation) at -0.4% y/y.

Monetary Policy

There were no changes to overnight interest rates in Q2, and the June update to the Summary of Economic Projections clearly reflected a “higher for longer” outlook, due to lingering inflation concerns. The median projection among FOMC members fell to just one 25bp rate cut in 2024, although to be fair, the committee was quite close to being evenly split between one rate cut and two. Fed Chair Jerome Powell reiterated during the most recent press conference that the committee will need to see more sustained progress towards the 2% inflation target before they will have sufficient confidence to begin cutting rates.

Economy

Data released in Q2 suggest a slowing, but still growing, US economy. The labor market is normalizing: new jobless claims rose by ~20k per week, open jobs fell to 8.06 million, and unemployment ticked higher by 20 basis points to 4.0%, but job creation remained solidly positive (3m avg +249k nonfarm payrolls added). Persistently high mortgage rates have inhibited housing sector activity. Manufacturing remains weak, but strength in services driven by solid consumer demand continues to drive the economy forward. Analysts currently forecast an acceleration in S&P 500 earnings growth in Q2, with bottom-up consensus estimates at +8.8% y/y.

Bond Market

Treasury yields moved higher across the curve in Q2, particularly in the belly and long end as investors continue to grapple with longer-term inflation assumptions and US budget deficits. Credit spreads tightened in April and early May, but then retrenched in June to finish slightly wider for the quarter. In the aggregate, the US investment grade bond market is down slightly YTD at the halfway point of 2024.

Stock Market

Gains were concentrated in Q2, continuing the “narrow rally” theme. Large caps that could be tied to the generative A/I theme did well in Q2, led by semiconductor stocks like Nvidia (+36.7%). Public utility stocks also continue to benefit from the significant expansion in power and cooling that will be required to support the growing A/I infrastructure. Elsewhere though, it was a difficult quarter, with cyclicals, small caps, and most international benchmarks finishing lower.

Albion’s “Four Pillars”:

Economy & Earnings

The US economy has been resilient despite the higher interest rate environment. Analysts are forecasting low double digit EPS growth in 2024; growth of that magnitude will depend on the economy avoiding recession.

Valuation

The S&P 500’s forward P/E of 21x is well above the long run average, so valuations are likely to be a headwind to future returns. More predictive metrics like CAPE, Tobin’s Q, and the Buffett Indicator (Eq Mkt Cap / GDP) suggest that compound annual returns from current levels over the coming decade are likely to be in the single digits.

Interest Rates

Futures markets imply that the Fed will cut overnight interest rates once or twice in 2024, most likely at some point in the 2nd half of the year. Belly and long end rates are already at or near what are likely to be their post-pandemic equilibrium levels, unless the US economy enters a recession.

Inflation

After falling rapidly in late 2022 and all of 2023, inflation has become sticky in the 3-4% range in early 2024. Services inflation remains somewhat elevated, in part due to heavily lagged shelter costs. Volatile energy prices driven by geopolitical conflicts could present a risk to the inflation outlook.

Albion Financial Group is an SEC registered investment advisor. The information provided is intended solely for educational purposes and should not be construed as an offer or solicitation for the purchase or sale of any particular securities product, service, or investment strategy. Past performance is not indicative of future performance. Additional information about Albion Financial Group is also available on the SEC’s website at www.adviserinfo.sec.gov under CRD number 105957. Albion Financial Group only transacts business in states where it is properly registered, notice filed or excluded or exempted from registration or notice filing requirements.

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Weekly Market Recap – June 21, 2024

Weekly Market Recap – June 21, 2024 [PDF]Download

Weekly Recap:

Most equity benchmarks finished in the green once again last week, albeit with different leadership this time. Tech stocks took a step back on Thursday and Friday, particularly the semiconductor companies (Nvidia, Broadcom, Taiwan Semiconductor Manufacturing, Qualcomm, etc.) that had been fueling the recent rally. In the end, cyclicals and small/midcap stocks outperformed on the week as what had been a very narrow rally broadened out a bit.

Despite a variety of macro updates that in the aggregate were a bit weaker than expected, rates moved higher by 3-5 basis points across the curve. Meanwhile, IG corporate credit spreads widened for the 3rd consecutive week, and have now widened by nearly 10 basis points on average since the end of May.

Most of the macro updates from last week suggested a gradually softening outlook for the US consumer, including:

* US retail sales ex autos fell 0.1% sequentially for the 2nd straight month

* The NAHB Housing Market Index fell 2 points to 43 in June

* Housing Starts fell 5.5% m/m on a seasonally adjusted basis in May

* Residential Building Permits fell 3.8% m/m on a seasonally adjusted basis in May

* The Conference Board LEI fell 0.5% m/m and is now -14.2% off its cycle peak

However, there were a few bright spots that allowed cyclicals to rise, including:

* Industrial Production rose 0.9% m/m in May

* US Manufacturing Capacity Utilization rebounded 50bp to 78.7% in May

* S&P’s Manufacturing PMI rose to 51.7 in preliminary June data

* S&P’s Services PMI rose to 54.8 in preliminary June data

Chart of the Week: Conference Board LEI (Total)

Albion’s “Four Pillars”:

Economy & Earnings

The US economy has been resilient despite the higher interest rate environment. Analysts are forecasting low double digit EPS growth in 2024; growth of that magnitude will depend on the economy avoiding recession.

Valuation

The S&P 500’s forward P/E of 21x is well above the long run average, so valuations are likely to be a headwind to future returns. More predictive metrics like CAPE, Tobin’s Q, and the Buffett Indicator (Eq Mkt Cap / GDP) suggest that compound annual returns from current levels over the coming decade are likely to be in the single digits.

Interest Rates

Futures markets imply that the Fed will cut overnight interest rates once or twice in 2024, most likely at some point in the 2nd half of the year. Belly and long end rates are already at or near what are likely to be their post-pandemic equilibrium levels, unless the US economy enters a recession.

Inflation

After falling rapidly in late 2022 and all of 2023, inflation has become sticky in the 3-4% range in early 2024. Services inflation remains somewhat elevated, in part due to heavily lagged shelter costs. Volatile energy prices driven by geopolitical conflicts could present a risk to the inflation outlook.

Albion Financial Group is an SEC registered investment advisor. The information provided is intended solely for educational purposes and should not be construed as an offer or solicitation for the purchase or sale of any particular securities product, service, or investment strategy. Past performance is not indicative of future performance. Additional information about Albion Financial Group is also available on the SEC’s website at www.adviserinfo.sec.gov under CRD number 105957. Albion Financial Group only transacts business in states where it is properly registered, notice filed or excluded or exempted from registration or notice filing requirements.