April 2024 Monthly Recap

April 2024 Monthly Recap

 

April 2024 in Review

 

Hello everyone and welcome to our April monthly recap. Let’s get right to it.

 

In April we saw markets retreat amid high volatility, as positive economic growth data caused market participants to reassess their expectations for interest rate cuts by the Fed, reminding us that good economic news doesn’t always mean good news for markets.  While traders started the year anticipating 5 or more rate cuts, the market is now expecting 2 cuts for the year, with the first cuts likely in September or November.

 

Although markets recovered some of the losses in the last 7 trading days of the month, the 5-month winning streak we had was broken with the S&P, NASDAQ, and Dow all falling 4-5% in April. Overseas, Emerging Market stocks rose almost 1%, while Developed Market stocks lost close to 2.5%.

 

As for The Mag 7, Google and Tesla were the only 2 who ended in positive territory, gaining just over 8% and 4% respectively, with Meta being the worst performer, down almost 11.5%.

 

Despite the renewed conflict in the middle east, upcoming election, and a generally negative news cycle we still remain optimistic for the rest of the year.

 

Wrapping up our market news, Biden signed off on Congress’ bill to ban TikTok in the US, unless its parent company, ByteDance, sells TikTok by mid-January next year. Two days later, ByteDance responded that they have no intention of selling TikTok and expects an appeal over the constitutionality of free speech to overturn this bill, as has been the case with prior TikTok ban attempts. Even if that doesn’t happen, the question remains about who would actually be able to buy TikTok, as Google, Meta, and Apple would likely be blocked due to anti-trust concerns.

 

Abroad, the conflict in the Middle East escalated after Iranian forces launched a failed drone attack on Israel. At home, we’ve seen antisemitic crimes continue to rise, as well as pro-Palestinian protest groups occupying university facilities across the country. The combination of these led to several colleges, where clashes between protest groups worsened, to switch to online learning for the rest of the spring semester.

 

Back in Washington, bipartisan aid packages were passed to provide funding for Ukraine, Israel, and Taiwan.

 

We also saw the FTC pass major legislation banning most non-compete agreements. While these contracts were previously governed at the state level, the new federal bill nullifies all existing non-competes that are covered under the bill. As you probably guessed, big businesses are already challenging this.

 

As for realtors, April couldn’t have been a more challenging month after the realization that the cuts in mortgage rates that were expected to start as early as March, now looked more likely to be postponed until this fall. To make matters worse, the National Association of Realtors lost the class action lawsuit filed against them in Missouri over antitrust violations and facilitating practices that indirectly inflated commissions.

 

Historically, the commissions paid when selling a house was negotiated directly between the seller and their agent, with the commission paid to the buyer’s agent paid directly by the seller and disclosed on the MLS listing. This gave the seller’s agent a very strong argument for why the seller shouldn’t reduce what the buyer’s agent would be paid, as it could reduce the potential showings by agents who filtered out available listings that would pay them commissions below market rates.

 

Assuming the federal court signs off on the settlement, starting in mid-July, MLS listings will no longer include buyers’ agents’ commissions. In fact, commission rates will now be negotiated directly between homebuyers and their agents, giving them more negotiating power based on what the agent will be doing for them. Even though those commissions won’t be paid directly buy sellers, sellers can (and likely will) include closing cost concessions so buyers won’t have to pay those commissions out of pocket. This is also expected to increase the practice of flat-fee representation for buyers.

 

Finishing things off was the DOL publishing the Retirement Security Rule at the end of the month, dubbed the Fiduciary Rule 2.0, which expands coverage to brokers recommending rollovers between retirement plans and IRAs, when those rollovers would go into products or accounts which the broker doesn’t have an ongoing fiduciary responsibility for.

 

While this doesn’t have any impact on the way we do business, or the recommendations we make, it will impact brokers who have evaded the prior rules by using commission-based brokerage accounts and annuities to persuade investors to rollover retirement accounts to the products they are selling. Under the prior rule, recommending those types of products only needed to be suitable at that time, even if it wasn’t going to be in the investor’s long-term best interest.

 

Variations of this rule have spanned three different presidential administrations, with lobbying by insurance companies and brokerage firms having successfully overturned, or created exemptions for their products under the prior rules, so this is at least a step in the right direction. The question now becomes how strongly these rules are enforced, as it’s up to the broker’s internal compliance department to determine if the reasons for the recommendations are satisfactory enough for them to sign off on them. The only time when regulators get involved is when there is a complaint or during their periodic audits of randomly selected client files.

 

That’s a wrap guys. For those of you we’ve already done our Spring reviews with, it’s been great seeing and talking to you. For everyone else, we look forward to catching up with you soon.

 

Until next month, Traverse on and enjoy the spring weather!

 

Laurence