The Family Office Chronicle

According to Statista, at the end of 2023, there were nearly 22 million American millionaires. That’s almost 7% of our population; one in every 14 Americans is now a millionaire. One might assume that being a millionaire would guarantee entry into a privileged class, but we believe a credible argument can be made that our millionaires are the single most underserved cohort in the U.S.

Elections in America can get pretty intense. Politics has sometimes been a blood sport quite literally, but we caution readers to compartmentalize when considering their vote because it has been a very bad idea to confuse the outcome of elections with the behavior of the stock market. In this month’s Chronicle, we’ll be reminding our readers not to predict the financial outcomes of elections. We believe that they will take comfort from the actual historical record.

August, typically a time of dog days and road trips, got off to a rocky start this year. On August 5th, the Nikkei 225, Japan’s broad stock market, experienced its worst one-day loss ever, down 12.4%. Stocks tumbled worldwide, including in the U.S., with the Nasdaq off over 6% in early trading and the S&P 500 off a similar amount by noon. The culprit, we were told, was a weaker-than-expected jobs report for the U.S. These economic reports miss their targets all the time. There’s nothing new about that, but this felt more like the straw that broke the camel’s back. Although the S&P 500 has recovered, there was no mistaking the gloomy mood on Wall Street. Once again, we heard the dire warnings of an imminent recession. Investors must remember that this was all entirely normal and that the media values its clicks and views more than your portfolio.

investing has a rich and varied lexicon of colorful words and phrases like “dead cat bounce” and “garbatrage.” “Catch a falling knife” is a particularly colorful term that refers to buying a stock at a perceived bottom after a sharp decline in value. It’s a cautionary tale, a word to the wise. It follows statements like “How much farther can it fall?” and “It’s never been so cheap.” This can happen on the upside, too. Sometimes, prices become irrationally exuberant, and FOMO—fear of missing out—can create an irresistible urge to get in on the action. Residential real estate has been on fire since the Pandemic began, and the work-from-home megatrend began in earnest. We suggest our readers carefully consider either buying or selling: prices have never been higher, and the knife may soon begin to fall. They should take great care before reaching out.

The history of the U.S. Stock Market is a fascinating thing, both a child of and a progenitor of the American technological and cultural dynamic. It both reflects and enables our unique form of capitalism, which, by any measure of wealth creation, is unparalleled in world history. Once the exclusive club of the truly wealthy, the stock markets now represent the wealth of our entire nation: according to the Fed, over 58% of U.S. households owned stocks in 2022. Yet the distribution of success in stock investing is wildly skewed; a scattergram of investing success would be U-shaped, with a tremendous amount of people experiencing very low and even negative total returns and another large group enjoying very significant real gains. Trying to explain this phenomenon is among the most perplexing things about the market, as all investors have what economists call perfect information: complete and instantaneous knowledge of all prices, and access to all the externalities that could affect them.

Americans are living and working longer. It seems likely that breakthroughs in medical and health technology will continue to expand the human lifespan even further. While that seems like a very positive forecast, it will put a strain on retirement security, as nest eggs will have to last for many, many years.

On February 23rd, the Pew Research Center found that 57% of Americans felt that dealing with immigration is their third top priority for 2024, just behind national security and crime. Four days later, immigration surged to the top spot, according to Gallup. Since January 2021, a minimum of 6.3 million people have crossed the border, according to the Office of Homeland Security Statistics, and cities across the U.S. are under tremendous pressure from this massive influx of migrants. This is an everyday story. However, lost among all the clickbait and headlines is another story, and we rarely hear of it: emigration. Many Americans are moving out of the U.S. The latest estimate from the State Department was nine million U.S. citizens live outside of the country.

In this clickbait world, it can be easy to miss a significant news story. Newsletters about money and investing, like this one, can venture far from corporate profits, stock prices, and interest rates because so much of the world’s political, economic, social, and cultural news impacts asset prices. However, occasionally, there is news that is entirely within the domain of finance, and in 2024, we’ve already had a big one. It’s a story of the tortoise finally beating the hare, and the wisdom of focusing on the truly important things.

2023 was a very good year for American stocks, with the S&P 500 up 24.23% (26.44% with dividends) after closing out the year up 4.42% in December. This is despite the fact that the economic and geopolitical news was pretty awful. Interest rates rose multiple times, 30-year home loans were over 7%, inflation remained stubbornly high, government spending was out of control (again), and there were two shooting wars involving nuclear-armed combatants.