The Objective Advisor

Many of us spend decades looking forward to retirement—the day when we no longer have to work. Yet at the same time, work is often the foundation of a meaningful life. It gives structure to our days, opportunities to contribute, social connection, and a sense that we are needed.

This tension is not just philosophical. Research has consistently shown a significant statistical correlation between men retiring and an increased risk of early death. To be clear, retirement itself is not the cause—but the sudden loss of purpose, routine, and identity that can accompany it matters deeply. When meaningful engagement disappears, health and well-being often follow.

When we talk about the future, the focus usually lands on numbers: savings targets, performance reports, next steps. Those matter, of course, but they aren’t the ultimate point.

Part of the purpose of preparing for what’s ahead is to enjoy future freedom—stepping back from the noise and finding a sense of calm and direction that feels right to you. Every week brings new developments—from evolving conflicts to policy shifts and economic updates that influence how we envision the road ahead. The headlines may change quickly, but your focus and consistency are what drive lasting progress.

Second quarter earnings season is in the books, and it was a good one. S&P 500 companies collectively grew earnings at a double-digit pace for the first time in three years. Companies beat estimates at a solid 79% clip. Guidance from company CEOs and CFOs was relatively upbeat. And although some were a bit disappointed by big technology results based on stock reactions, the problem was high expectations more than anything else.

The Numbers

Second quarter numbers were quite good and generally in line with LPL Research’s expectations. In our earnings preview on July 1, we called for double-digit earnings growth and we got it — S&P 500 earnings per share (EPS) grew nearly 12% in the quarter, or over 13% excluding a $9.1 billion write-down of media assets by Warner Brothers Discovery (WBD). Profit margins expanded quarter over quarter by a not insignificant 0.4%, indicating companies did a good job controlling costs.

Earnings Growth Accelerated Nicely in Q2, Keeping Second Half Expectations High

Source: LPL Research, FactSet 09/05/24
Past performance is no guarantee of future results. Estimates may not develop as predicted.

The LPL Strategic & Tactical Asset Allocation Committee (STAAC) determines the firm’s investment outlook and asset allocation that helps define LPL Research’s investment models and overall strategic and tactical investment thinking and guidance. The committee is chaired by the chief investment officer and includes investment specialists from multiple investment disciplines and areas of focus. The STAAC meets weekly to foster a close monitoring of all global economic and capital markets conditions to ensure that all the latest information is being digested and incorporated into its investment thought.

The first half of the year was a challenging environment for a lot of fixed income markets, especially higher-quality markets. With the Federal Reserve (Fed) seemingly unlikely to lower interest rates until after the summer months (at the earliest), the “higher for longer” narrative has kept a lid on any sort of bond market rally. While falling interest rates help provide price appreciation in this higher-for-longer environment, fixed income investors are likely better served by focusing on income opportunities, which has been the traditional goal of fixed income investors. Investors can best navigate the latecycle economic environment by adding high-quality bonds, offering attractive risk-adjusted returns, and lowering overall portfolio volatility. Consider moving away from cash, with the Fed likely to cut rates in the second half.

Key Themes for the Second Half

Sharp shifts in interest rate expectations have been a hallmark of the bond market over the last few years, but with volatility comes opportunity, and investors should consider:

• Current Bond Yield Levels Offer Opportunity: Treasury yields are near their highest levels in decades, making fixed income an attractive asset class again. Investors can build diversified portfolios with high-quality bonds offering attractive returns.
• Focus on Income: With rate cuts likely, a focus on income generation becomes more important for fixed income investors than price appreciation. Consider fixed income over cash.
• Don't Expect Big Moves in Longer-Term Yields: An inverted yield curve suggests limited potential for significant declines in longer-term bond yields.
• Mind the Gap: Fixed income volatility in the first half was characterized by changing rate cut expectations. Second half volatility will likely be due to changing expectations on the depth of rate-cuts expected in the rate-cutting cycle. Currently, there is a gap between market expectations and Fed communication.
• Election Volatility/Noise: As we get closer to Election Day, economic policy uncertainty will likely pick up as each political party jockeys for votes. High economic uncertainty has historically been constructive for core bonds, (as explained in “Election Anxiety? Could Bonds Calm Your Fears?”) but high expected budget deficits could keep interest rates elevated.

The LPL Strategic & Tactical Asset Allocation Committee (STAAC) determines the firm’s investment outlook and asset allocation that helps define LPL Research’s investment models and overall strategic and tactical investment thinking and guidance. The committee is chaired by the chief investment officer and includes investment specialists from multiple investment disciplines and areas of focus. The STAAC meets weekly to foster a close monitoring of all global economic and capital markets conditions to ensure that all the latest information is being digested and incorporated into its investment thought.

As we approach Thanksgiving, the thought of discussing money matters with our loved ones can stir up all kinds of emotions. Those conversations can feel as tricky as trying to carve the perfect turkey—so delicate!

But here's a little food for thought: being real and open about financial topics with your family and friends could actually strengthen your bonds in ways you might not expect. Sure, it might be tempting to dodge the money chat and stick to lighter topics like the weather or holiday recipes. However, embracing these conversations can lead to a deeper understanding and connection with those you care about. It's a chance to share values, learn from each other's experiences, and support one another across the generational divide.

If you need more specific guidance on how to kickstart these conversations or navigate other tricky topics this holiday season, don't hesitate to reach out. Together, we can make this Thanksgiving one filled with unforgettable memories and stronger connections that last many lifetimes.

Enjoy the articles below, curated for you from the financial world this week. And please have a safe and happy Thanksgiving!

Thank you,
Paul Celentano

As headlines shift away from the recent flooding in Texas and elsewhere, the real work for many families is just beginning. Recovery after a tragedy often happens in phases: there’s the immediate response, and then there’s the longer, quieter rebuild. While initial support often quickly fades, the true progress comes from patience and steady effort over time.

Rebuilding—whether it’s after a natural disaster, a financial setback, or a major life event—always starts with a first step, however small. It’s learning to honor the memories of the past while embracing new beginnings and celebrating the progress you make along the way. The process can feel slow, but remember, this is where meaningful change and growth take root.

In the world of finance and investing, we often talk about numbers, trends, and strategies. But equally important to long-term success is a quality that doesn’t appear on balance sheets: humility. Recognizing what we know and—perhaps more importantly—what we don’t is essential to making sound financial decisions.

It is tempting to believe AI will provide clear and reliable answers. While these technologies hold significant promise, they can also produce “hallucinations”—outputs that appear confident and authoritative while being factually incorrect.

In financial terms, burn rate describes how quickly money goes out compared with how fast it comes in. Everyone has one — it’s simply the rhythm of how we use our income to support our lives. When you understand your own burn rate, you gain insight into what keeps your household running smoothly and where there’s room to build flexibility.

Most of the time, that rate feels invisible. Paychecks arrive, bills get paid, and life moves forward on autopilot. But when that rhythm breaks — whether from a layoff, a career change, family challenges or even a short-term disruption like a government shutdown — your personal burn rate suddenly comes into focus.

Most investors are familiar with risk tolerance — a psychological measure that reflects how you perceive risk and respond to market fluctuations. While understanding risk tolerance is essential, it doesn’t tell the whole story.

Risk capacity, in contrast, is an objective measure of your financial circumstances — not your feelings about risk. It analyzes your ability to absorb potential losses without jeopardizing your long-term goals. Factors such as your time horizon to retirement, income stability, savings rate, and future spending needs all determine how much risk you can afford to assume.

The end of another year is the perfect time to take stock of where you stand to make the most of opportunities that can benefit you now and in the future. Two of the most important ways are through a year-end financial review and strategic charitable giving.

A year-end review helps ensure that your financial plan stays aligned with your goals. It’s an opportunity to assess how your portfolio has performed and whether adjustments are appropriate, allowing you to evaluate whether your savings, spending and investment strategies are on track for retirement or other life goals. It’s also the time to review whether your tax planning, insurance coverage, and estate strategies still fit your current situation.

Every year leaves a trail of numbers behind—evidence of choices, effort, and focus. Each contribution, payment, and investment of your resources becomes part of a much bigger picture: the story of how daily discipline transforms into lasting progress. Steady, thoughtful action has a quiet brilliance that can compound over time.

This final stretch of the year can be a strategic one financially. While visions of sugar plums dance in some heads, many people are finalizing contributions, completing charitable gifts, reviewing coverage, and ensuring financial strategies still align with goals for the future. You don’t have to go it alone – I can help you save time, close loops and set the stage for a confident start to a new year while feeling strong about your performance in this one.

Jeffrey Roach, PhD, Chief Economist
Jeffrey Buchbinder, CFA, Chief Equity Strategist

When we wrote the annual outlook last November, the data was mixed. Some metrics hinted at emerging cracks in the economy while others suggested the growth trajectory in capital markets and the economy had legs. So, the variety of the data produced the narrative that business activity in the New Year would grow on an annual basis but experience some bumps in the first half of the year. Now, enter the revisions.