With headlines focused on the SpaceX IPO, inflation, and other upcoming events, many clients have questions on how these factors affect markets and their portfolios. As always, we hope this perspective and education shed some light on the bigger picture.
IPOs from high-profile private companies like SpaceX can generate a lot of headlines, so it’s important to understand both the opportunities and the nuances involved.
Here are the key perspectives to keep in mind:
Much of the enthusiasm for IPOs is due to the strength of the market this year, since companies prefer to go public when financial conditions are strong to maximize their share prices. So, while headlines are focused on the individual IPOs, this reflects broader positivity which benefits all investors.
One trend over the past decade is that companies have been staying private for longer because they have access to other sources of capital. This means that by the time they do go public, their starting valuations tend to be large. This is why SpaceX, for instance, is the largest IPO in history. Regardless of when they occur, IPOs are positive because they create new opportunities for a broader set of investors, especially once these companies are included in major indices.
It’s understandable that investors often focus on the first few days of the initial public offering, but the reality is that it’s better to maintain a long-term view. For example, the gains created by the largest tech companies today have taken decades to play out. While it’s tempting to focus on how IPOs perform in the first few days, this is not what supports portfolios in the long run.
Many headlines will focus on the private investors and venture capital firms that were early backers of these companies. It’s important to understand that this is only one part of the equation, since the VC business model is to make many risky bets and hope that one is a home run. So, these articles will naturally focus only on the successes, but ignore the investments that did not work out. For long-term investors, it’s more important to build a portfolio that aligns with financial goals, which may or may not include companies such as these.
It’s also important to maintain perspective around the overall market. The S&P 500 Information Technology sector currently trades at a forward price-to-earnings ratio of around 24x, above its historical average. So, it’s important to hold an appropriate portfolio that can take advantage of growth while also managing risk. In recent weeks, for instance, these sectors have been volatile due to the possible impact that higher interest rates might have.
The included chart shows how well public technology stocks have performed based on the Nasdaq Composite index, and also the fact that there have been periods of volatility along the way. While the current wave of IPOs is positive for markets, history consistently shows that patient, disciplined investors who stay focused on long-term goals tend to be better positioned to achieve financial success.
Inflation measures how quickly prices are rising across the economy, and the latest Consumer Price Index report shows that year-over-year inflation hit 4.2% in May, the highest level in three years.
Here are some key points to consider:
The main driver of the inflation jump is energy prices due to the war in Iran. The energy component of the CPI report rose 23.5% over the past year, with gasoline up 40.5%. Prices at the pump have declined slightly from their peak, but are still around $4.15 per gallon on average across the country.
Core inflation, which excludes food and energy, only rose 2.9%, confirming that the high headline number is due to energy. An even narrower measure that also excludes shelter, sometimes known as “supercore” inflation, came in at just 2.4%, suggesting that price increases have not yet spread to other categories.
The Federal Reserve kept rates unchanged at its April meeting, but the decision drew an unusually high number of dissents from Fed officials. According to market-based measures, a rate hike later in 2026 is now a possibility if energy-driven inflation proves persistent rather than temporary, especially because recent jobs reports have been stronger than expected.
While inflation is challenging for consumers, it’s important to note that this is due to “supply side” issues. So, the economic outcome depends heavily on developments in the Middle East and the reopening of the Strait of Hormuz.
The included chart on the Consumer Price Index helps illustrate how inflation has moved over time and how individual components like energy can cause short-term spikes even when underlying trends are more stable.
While near-term uncertainty is real, long-term investors have historically been well served by staying focused on their financial goals and maintaining a diversified approach rather than reacting to individual economic data points.
Overall, the stock market has performed well, reaching new all-time highs, with strong corporate profitability and a generally healthy economy. That said, there have also been recent swings in technology stocks, headlines on high-profile IPOs, and worries around rising inflation.
Much of the recent market swings come down to uncertainty around the Federal Reserve. After a strong jobs report and the Consumer Price Index rising at its fastest pace in three years, investors have begun to wonder whether the Fed might raise interest rates again. This shift in expectations is why technology stocks have become more volatile after a strong period.
Much of the rise in inflation is due to higher energy prices resulting from the war in Iran, and different inflation measures confirm this. For example, headline CPI rose 4.2% year-over-year, but when energy is excluded, CPI is only 2.9%. When excluding food, energy, and shelter, prices rose just 2.4%. In other words, while gasoline above $4 per gallon is a genuine challenge for households, these pressures have not yet spread broadly to other parts of the economy.
Why does any of this affect technology stocks in particular? Investors buy these companies largely because they expect high growth that extends far into the future, in contrast to more established businesses with steady cash flows. Since interest rates affect how those future profits are valued today, even small shifts, especially ones that change direction, can lead to larger swings.
A clear example of this sensitivity is the Magnificent 7, the group of large technology companies including Apple, Microsoft, Nvidia, Amazon, Alphabet, Meta, and Tesla. From their peak at the end of 2021 to their bottom in late 2022, when inflation was heating up and rates jumped, this group lost about half of its value. They then recovered as rates stabilized and the Fed eventually started to cut rates, eventually rallying to new highs.
At the same time, the strong market environment means there is enthusiasm around initial public offerings, or IPOs. This includes a wave of large IPOs, particularly among companies related to artificial intelligence. A number of high-profile names, including SpaceX, Anthropic, and OpenAI, are in the process of going public after years in which relatively few companies did so.
IPOs are a positive market development since they make shares of these businesses available to a broader set of investors. However, it’s important to understand that IPOs are not just about how these stocks perform over the first few days. Instead, the largest tech companies today rose over decades from their IPOs.
For long-term investors, the encouraging news is that broad market indices automatically incorporate successful new companies as they grow. This means you gain exposure to successful IPOs over time without needing to invest in any single offering directly. It is important to keep in mind that many of these companies have grown for years through venture capital and private investment. By the time they go public, institutional investors and company insiders have often already participated in much of the early growth. Company insiders are also typically subject to lock-up periods during which they cannot sell their shares.
It is also worth remembering that IPO activity tends to come in waves, often during strong economic periods when capital is plentiful and enthusiasm is high. The late 1990s is the most famous example, and the post-pandemic surge in special purpose acquisition companies was a more recent one. Both were relatively short-lived, which is a reminder of why a longer-term perspective is important.
Bringing this back to your portfolio, a few points are worth emphasizing. First, expectations for Fed policy can change quickly. Even if current expectations prove correct, the Fed is not anticipated to raise rates until late in the year, and only by 0.25%. This is a modest move by historical standards, especially compared to the cycle from 2022 to 2023, when the Fed raised rates from near zero to 5.25% over 11 hikes.
Second, the stock market is coming off a strong period. While market swings are normal, and sometimes healthy, history shows that the stock market has performed well across many different rate environments, including periods when rates are rising, particularly when the economy is healthy enough to support corporate earnings.
Third, while recent volatility reflects shifting expectations around inflation and the Fed, and the excitement around IPOs is understandable, neither is a reason to fundamentally change your long-term plan. Your portfolio is designed to navigate exactly these kinds of environments.
As always, please do not hesitate to reach out if you have any questions, or if you would simply like to talk through what any of these developments mean for your specific situation and goals.
Concerns or questions about how your investment portfolio will hold up in the current market environment? Contact Financial Synergies today.
We are a boutique, financial advisory and total wealth management firm with over 35 years helping clients navigate turbulent markets. To learn more about our approach to investment management please reach out to us. One of our seasoned advisors would be happy to help you build a custom financial plan to help ensure you accomplish your financial goals and objectives. Schedule a conversation with us today.
More relevant articles by Financial Synergies:
Blog Disclosures
This content, which contains security-related opinions and/or information, is provided for informational purposes only and should not be relied upon in any manner as professional advice, or an endorsement of any practices, products or services. There can be no guarantees or assurances that the views expressed here will be applicable for any particular facts or circumstances, and should not be relied upon in any manner. You should consult your own financial advisors as to legal, business, tax, and other related matters concerning any investment.
The commentary in this “post” (including any related blogs, videos, and social media) reflects the personal opinions, viewpoints, and analyses of the Financial Synergies Wealth Advisors, Inc. employees providing such comments, and should not be regarded as the views of Financial Synergies Wealth Advisors, Inc. or its respective affiliates or as a description of advisory services provided by Financial Synergies Wealth Advisors, Inc. or performance returns of any Financial Synergies Wealth Advisors, Inc. client.
Any opinions expressed herein do not constitute or imply endorsement, sponsorship, or recommendation by Financial Synergies Wealth Advisors, Inc. or its employees. The views reflected in the commentary are subject to change at any time without notice.
Nothing on this website constitutes investment or financial planning advice, performance data or any recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. It also should not be construed as an offer soliciting the purchase or sale of any security mentioned. Nor should it be construed as an offer to provide investment advisory services by Financial Synergies Wealth Advisors, Inc.
Any mention of a particular security and related performance data is not a recommendation to buy or sell that security. Financial Synergies Wealth Advisors, Inc. manages its clients’ accounts using a variety of investment techniques and strategies, which are not necessarily discussed in the commentary. Investments in securities involve the risk of loss. Past performance is no guarantee of future results.
Any charts provided here or on any related Financial Synergies Wealth Advisors, Inc. personnel content outlets are for informational purposes only, and should also not be relied upon when making any investment decision. Any indices referenced for comparison are unmanaged and cannot be invested into directly. As always please remember investing involves risk and possible loss of principal capital; please seek advice from a licensed professional. Any projections, estimates, forecasts, targets, prospects and/or opinions expressed in these materials are subject to change without notice and may differ or be contrary to opinions expressed by others. Information in charts have been obtained from third-party sources and data, and may include those from portfolio securities of funds managed by Financial Synergies Wealth Advisors, Inc. While taken from sources believed to be reliable, Financial Synergies Wealth Advisors, Inc. has not independently verified such information and makes no representations about the enduring accuracy of the information or its appropriateness for a given situation. All content speaks only as of the date indicated.
Financial Synergies Wealth Advisors, Inc. is a registered investment adviser. Advisory services are only offered to clients or prospective clients where Financial Synergies Wealth Advisors, Inc. and its representatives are properly licensed or exempt from licensure. Investments in securities involve the risk of loss. Past performance is no guarantee of future results.
See Full Disclosures Page Here
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Top Client Questions: SpaceX IPO, Inflation, and Tech Volatility
With headlines focused on the SpaceX IPO, inflation, and other upcoming events, many clients have questions on how these factors affect markets and their portfolios. As always, we hope this perspective and education shed some light on the bigger picture.
How does the SpaceX IPO affect long-term investors?
IPOs from high-profile private companies like SpaceX can generate a lot of headlines, so it’s important to understand both the opportunities and the nuances involved.
Here are the key perspectives to keep in mind:
Much of the enthusiasm for IPOs is due to the strength of the market this year, since companies prefer to go public when financial conditions are strong to maximize their share prices. So, while headlines are focused on the individual IPOs, this reflects broader positivity which benefits all investors.
One trend over the past decade is that companies have been staying private for longer because they have access to other sources of capital. This means that by the time they do go public, their starting valuations tend to be large. This is why SpaceX, for instance, is the largest IPO in history. Regardless of when they occur, IPOs are positive because they create new opportunities for a broader set of investors, especially once these companies are included in major indices.
It’s understandable that investors often focus on the first few days of the initial public offering, but the reality is that it’s better to maintain a long-term view. For example, the gains created by the largest tech companies today have taken decades to play out. While it’s tempting to focus on how IPOs perform in the first few days, this is not what supports portfolios in the long run.
Many headlines will focus on the private investors and venture capital firms that were early backers of these companies. It’s important to understand that this is only one part of the equation, since the VC business model is to make many risky bets and hope that one is a home run. So, these articles will naturally focus only on the successes, but ignore the investments that did not work out. For long-term investors, it’s more important to build a portfolio that aligns with financial goals, which may or may not include companies such as these.
It’s also important to maintain perspective around the overall market. The S&P 500 Information Technology sector currently trades at a forward price-to-earnings ratio of around 24x, above its historical average. So, it’s important to hold an appropriate portfolio that can take advantage of growth while also managing risk. In recent weeks, for instance, these sectors have been volatile due to the possible impact that higher interest rates might have.
The included chart shows how well public technology stocks have performed based on the Nasdaq Composite index, and also the fact that there have been periods of volatility along the way. While the current wave of IPOs is positive for markets, history consistently shows that patient, disciplined investors who stay focused on long-term goals tend to be better positioned to achieve financial success.
Why is inflation at its highest level in three years?
Inflation measures how quickly prices are rising across the economy, and the latest Consumer Price Index report shows that year-over-year inflation hit 4.2% in May, the highest level in three years.
Here are some key points to consider:
The main driver of the inflation jump is energy prices due to the war in Iran. The energy component of the CPI report rose 23.5% over the past year, with gasoline up 40.5%. Prices at the pump have declined slightly from their peak, but are still around $4.15 per gallon on average across the country.
Core inflation, which excludes food and energy, only rose 2.9%, confirming that the high headline number is due to energy. An even narrower measure that also excludes shelter, sometimes known as “supercore” inflation, came in at just 2.4%, suggesting that price increases have not yet spread to other categories.
The Federal Reserve kept rates unchanged at its April meeting, but the decision drew an unusually high number of dissents from Fed officials. According to market-based measures, a rate hike later in 2026 is now a possibility if energy-driven inflation proves persistent rather than temporary, especially because recent jobs reports have been stronger than expected.
While inflation is challenging for consumers, it’s important to note that this is due to “supply side” issues. So, the economic outcome depends heavily on developments in the Middle East and the reopening of the Strait of Hormuz.
The included chart on the Consumer Price Index helps illustrate how inflation has moved over time and how individual components like energy can cause short-term spikes even when underlying trends are more stable.
While near-term uncertainty is real, long-term investors have historically been well served by staying focused on their financial goals and maintaining a diversified approach rather than reacting to individual economic data points.
Summary: Inflation Measures and IPOs
Overall, the stock market has performed well, reaching new all-time highs, with strong corporate profitability and a generally healthy economy. That said, there have also been recent swings in technology stocks, headlines on high-profile IPOs, and worries around rising inflation.
Much of the recent market swings come down to uncertainty around the Federal Reserve. After a strong jobs report and the Consumer Price Index rising at its fastest pace in three years, investors have begun to wonder whether the Fed might raise interest rates again. This shift in expectations is why technology stocks have become more volatile after a strong period.
Much of the rise in inflation is due to higher energy prices resulting from the war in Iran, and different inflation measures confirm this. For example, headline CPI rose 4.2% year-over-year, but when energy is excluded, CPI is only 2.9%. When excluding food, energy, and shelter, prices rose just 2.4%. In other words, while gasoline above $4 per gallon is a genuine challenge for households, these pressures have not yet spread broadly to other parts of the economy.
Why does any of this affect technology stocks in particular? Investors buy these companies largely because they expect high growth that extends far into the future, in contrast to more established businesses with steady cash flows. Since interest rates affect how those future profits are valued today, even small shifts, especially ones that change direction, can lead to larger swings.
A clear example of this sensitivity is the Magnificent 7, the group of large technology companies including Apple, Microsoft, Nvidia, Amazon, Alphabet, Meta, and Tesla. From their peak at the end of 2021 to their bottom in late 2022, when inflation was heating up and rates jumped, this group lost about half of its value. They then recovered as rates stabilized and the Fed eventually started to cut rates, eventually rallying to new highs.
At the same time, the strong market environment means there is enthusiasm around initial public offerings, or IPOs. This includes a wave of large IPOs, particularly among companies related to artificial intelligence. A number of high-profile names, including SpaceX, Anthropic, and OpenAI, are in the process of going public after years in which relatively few companies did so.
IPOs are a positive market development since they make shares of these businesses available to a broader set of investors. However, it’s important to understand that IPOs are not just about how these stocks perform over the first few days. Instead, the largest tech companies today rose over decades from their IPOs.
For long-term investors, the encouraging news is that broad market indices automatically incorporate successful new companies as they grow. This means you gain exposure to successful IPOs over time without needing to invest in any single offering directly. It is important to keep in mind that many of these companies have grown for years through venture capital and private investment. By the time they go public, institutional investors and company insiders have often already participated in much of the early growth. Company insiders are also typically subject to lock-up periods during which they cannot sell their shares.
It is also worth remembering that IPO activity tends to come in waves, often during strong economic periods when capital is plentiful and enthusiasm is high. The late 1990s is the most famous example, and the post-pandemic surge in special purpose acquisition companies was a more recent one. Both were relatively short-lived, which is a reminder of why a longer-term perspective is important.
Bringing this back to your portfolio, a few points are worth emphasizing. First, expectations for Fed policy can change quickly. Even if current expectations prove correct, the Fed is not anticipated to raise rates until late in the year, and only by 0.25%. This is a modest move by historical standards, especially compared to the cycle from 2022 to 2023, when the Fed raised rates from near zero to 5.25% over 11 hikes.
Second, the stock market is coming off a strong period. While market swings are normal, and sometimes healthy, history shows that the stock market has performed well across many different rate environments, including periods when rates are rising, particularly when the economy is healthy enough to support corporate earnings.
Third, while recent volatility reflects shifting expectations around inflation and the Fed, and the excitement around IPOs is understandable, neither is a reason to fundamentally change your long-term plan. Your portfolio is designed to navigate exactly these kinds of environments.
As always, please do not hesitate to reach out if you have any questions, or if you would simply like to talk through what any of these developments mean for your specific situation and goals.
Concerns or questions about how your investment portfolio will hold up in the current market environment? Contact Financial Synergies today.
We are a boutique, financial advisory and total wealth management firm with over 35 years helping clients navigate turbulent markets. To learn more about our approach to investment management please reach out to us. One of our seasoned advisors would be happy to help you build a custom financial plan to help ensure you accomplish your financial goals and objectives. Schedule a conversation with us today.
More relevant articles by Financial Synergies:
Blog Disclosures
This content, which contains security-related opinions and/or information, is provided for informational purposes only and should not be relied upon in any manner as professional advice, or an endorsement of any practices, products or services. There can be no guarantees or assurances that the views expressed here will be applicable for any particular facts or circumstances, and should not be relied upon in any manner. You should consult your own financial advisors as to legal, business, tax, and other related matters concerning any investment.
The commentary in this “post” (including any related blogs, videos, and social media) reflects the personal opinions, viewpoints, and analyses of the Financial Synergies Wealth Advisors, Inc. employees providing such comments, and should not be regarded as the views of Financial Synergies Wealth Advisors, Inc. or its respective affiliates or as a description of advisory services provided by Financial Synergies Wealth Advisors, Inc. or performance returns of any Financial Synergies Wealth Advisors, Inc. client.
Any opinions expressed herein do not constitute or imply endorsement, sponsorship, or recommendation by Financial Synergies Wealth Advisors, Inc. or its employees. The views reflected in the commentary are subject to change at any time without notice.
Nothing on this website constitutes investment or financial planning advice, performance data or any recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. It also should not be construed as an offer soliciting the purchase or sale of any security mentioned. Nor should it be construed as an offer to provide investment advisory services by Financial Synergies Wealth Advisors, Inc.
Any mention of a particular security and related performance data is not a recommendation to buy or sell that security. Financial Synergies Wealth Advisors, Inc. manages its clients’ accounts using a variety of investment techniques and strategies, which are not necessarily discussed in the commentary. Investments in securities involve the risk of loss. Past performance is no guarantee of future results.
Any charts provided here or on any related Financial Synergies Wealth Advisors, Inc. personnel content outlets are for informational purposes only, and should also not be relied upon when making any investment decision. Any indices referenced for comparison are unmanaged and cannot be invested into directly. As always please remember investing involves risk and possible loss of principal capital; please seek advice from a licensed professional. Any projections, estimates, forecasts, targets, prospects and/or opinions expressed in these materials are subject to change without notice and may differ or be contrary to opinions expressed by others. Information in charts have been obtained from third-party sources and data, and may include those from portfolio securities of funds managed by Financial Synergies Wealth Advisors, Inc. While taken from sources believed to be reliable, Financial Synergies Wealth Advisors, Inc. has not independently verified such information and makes no representations about the enduring accuracy of the information or its appropriateness for a given situation. All content speaks only as of the date indicated.
Financial Synergies Wealth Advisors, Inc. is a registered investment adviser. Advisory services are only offered to clients or prospective clients where Financial Synergies Wealth Advisors, Inc. and its representatives are properly licensed or exempt from licensure. Investments in securities involve the risk of loss. Past performance is no guarantee of future results.
See Full Disclosures Page Here
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