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Do you remember being involved in a bicycle accident as a child?

When I turned 5, I got a brand new bike for my birthday. Excitement overwhelmed me as I rode down our gravel driveway and onto the country road marked Chip and Seal. I picked up speed as I rode down the hill toward the low water bridge near our house. Before I knew it, I was flying headfirst over my handlebars and my forehead was full of an unwelcome encounter with Mr. Chip and Seal (aka the road). Of course, we didn’t wear helmets back then and my mom spent the evening picking out the remnants of small rocks stuck in my forehead.

I learned that day that as you navigate the ups and downs of the road, you must always look ahead to navigate the terrain and avoid danger. Recently, clients have frequently asked a question: “Where do you think the market will go for the remainder of 2024?” My answer is that we don’t have a crystal ball, but we know that historically, markets don’t like uncertainty. We believe the remainder of 2024 brings potential uncertainty, and steps should be taken to strengthen portfolios against what may be a less friendly market.

Stock markets reached new highs in the first half of the year, mainly due to expectations of lower interest rates and a stronger-than-expected economy. Future earnings will depend to a large extent on growth in corporate earnings.

With earnings season upon us and consensus expectations currently calling for a 9% increase in earnings per share for the S&P 500, I believe estimates have been stable and it is critical to remain disciplined on equities in the first half of earnings season. Contributions from mega-cap technology will again be large. Still, we should start to see some contributions from the rest of the index, which will likely come from the financials, energy, utilities and healthcare sectors, according to LPL Research.

While it is tempting to continue to “ride” these trends, the outlook for the second half of 2024 shows that the economy is heading for a slowdown, while volatility is likely to increase given geopolitical uncertainty and the upcoming presidential election.

What’s next? As I move towards August, I will be looking for opportunities in the energy, industrials and communications services sectors, while remaining disciplined on US large caps with strong growth potential.

What about all that cash taking advantage of the current higher interest rate environment? Now might be a good time to replace some cash holdings with bonds to lock in today’s higher bond yields. Yes, it’s been a rough couple of years for bonds, but after yields peaked in 2023, bonds again offered attractive risk-adjusted returns. Also, keep in mind that if the Fed cuts rates, interest on cash accounts will fall.

Much like the excitement of my first ride on my brand new bike, we have experienced the trends of late 2023 with surprisingly robust economic growth and stubborn but easing inflation. The ride may get bumpier as we look ahead to the second half of 2024. In this environment, we must do what I did not do on my first ride on my new bike and successfully navigate the potential uncertainty.

Imagine if I had decided to never ride a bike again because of the fear of uncertainty. I would never have been able to go on a mission trip to North Africa and ride a mountain bike from village to village. We must keep riding bikes to take advantage of the opportunities of the future. Stay patient and disciplined as you navigate the uncertainty, while remaining focused on your long-term goals.

As far as I know, I suffered no long-term negative effects from my bicycle accident, but don’t ask my wife.

Joe Shearrer is a vice president and wealth advisor at Fervent Wealth Management LLC in Springfield. He can be reached at [email protected].