Compound’s Post

Take a look at our latest market commentary!

August, September and October historically produce large swings in the market, but that volatility tends to decrease as the year winds down. Historical patterns aside, investors need to feel confident the rate environment has peaked before stocks and bonds can stabilize and possibly see better trends in the months ahead. In the meantime, investors should look through the volatility and maintain balance across equities, fixed income, cash and alternatives in accordance with their risk profile and investment strategy.

It's almost 2024 and clients are asking what to expect next year with the #economy and #investments markets. Here are some clues from LPL Financial Research.

Looking toward 2024, we see some key themes for stocks. A more supportive economic environment and a young bull market are just a few of the ideas highlighted in today’s article—and in the #LPLOutlook. See #WeeklyMarketCommentary for more and our related investment conclusions → https://ow.ly/yZgW50QkC1X

Stocks have defied expectations during the first half of the year. Although the recent upturn in U.S. equity markets has been encouraging, most analysts remain cautious as uncertainty remains high regarding the Fed’s next move, inflation, and a possible recession. Click below to read more in our 2Q 2023 Financial Market Commentary & Outlook. Paradigm Wealth Management is here to help ensure that you have the right long-term plan for your personal situation. https://lnkd.in/e_5vw8BT

The recent performance of the stock market, characterized by its low volatility, has left many investors in a state of anticipation. Morgan Stanley Wealth Management's assessment that valuations are unlikely to experience significant fluctuations in the near future only adds to this sentiment. It's a viewpoint that warrants careful consideration. The notion that equities will remain "range-bound" in the coming months is not unfounded, given the prevailing economic conditions. Lisa Shalett, the Chief Investment Officer, pointed out several factors contributing to this cautious outlook. These include stubbornly high inflation rates, underwhelming earnings reports, a surplus of inventories, and a weakening consumer base. These dynamics create a complex interplay between earnings and valuations, making it difficult to foresee any substantial market breakthroughs. One interesting facet of Shalett's perspective is the emphasis on returns from coupons, particularly the attractive yields offered by US Treasury bonds – levels not witnessed in over a decade. This notion underscores the significance of diversifying investment portfolios and incorporating income-generating assets. In the face of a potentially range-bound equities market, it's imperative for investors to adopt a diversified and resilient investment strategy. Diversification across asset classes, including bonds, real estate, and even alternative investments like cryptocurrencies or precious metals, can help mitigate risks associated with stock market volatility. Additionally, keeping a close eye on economic indicators and industry trends will be essential. As the economic cycle evolves, sectors that were once outperforming may start to lag, and vice versa. Staying agile and ready to adjust your portfolio in response to changing conditions can be a valuable approach. Lastly, focusing on individual stock selection rather than broad market bets might prove beneficial. Identifying companies with strong fundamentals, robust earnings potential, and solid growth prospects could be a way to outperform a market that's expected to see limited overall movement. As we reflect on this analysis, it raises intriguing questions. How do you interpret the current market situation? Are alternative investment strategies becoming more appealing as traditional equities appear constrained? In this environment, what adjustments are you considering in your investment approach? Let's engage in a dialogue. #MarketAnalysis #FinancialInsights #InvestmentStrategies #EconomicOutlook https://lnkd.in/dNWDBr4F

As markets move higher amidst reports that inflation is moving downwards toward the Federal Reserve’s 2% target, Jacob Sonenshine of Barron’s reminds us that “The stock market is more complicated than it looks. Nothing is simple.” In the article below, Sonenshine highlights a factor that isn’t so attractive about disinflation. Disinflation could cut into margins and the pricing of goods and services, negatively affecting corporate earnings. While the impact hasn’t been seen yet amidst strong earnings news, Carapace Financial believes that investors should consider the entire inflation picture before making investment decisions in the coming months. 

Market Insights: Changing Rate Expectations and Stock Market Impact Expectations for Federal Reserve rate cuts boosted stock records earlier, but recent doubts about rate reductions are increasing scrutiny of the bull market. The S&P 500 remains strong, though sectors like tech, cyclicals, and banks may face challenges if rates stay high. Investors should monitor these shifts closely as market dynamics evolve.

Long-term market data supports the notion that stocks will grow purchasing power and beat cash no matter when you decide to invest. Determining how to invest a sizable cash balance is often a difficult decision. There are always a series of risks that could push stocks lower in the short-term. The key is to acknowledge no one can reliably predict short-term market outcomes and to instead use long-term stock market trends as our guide when deciding when to invest cash in the market. These trends include: 1. There are only a handful of 10-year periods where an S&P 500 portfolio underperformed cash and it did so by <5% each time. Stocks often outgained cash by 5%+ during other periods. 2. Even if you had invested near the top of the worst bear markets (Great Depression, 1970’s Stagflation, and Global Financial Crisis), an S&P 500 portfolio would pull in front of cash within an average of 6 years. 3. Stocks reliably return between 9% and 14% annually over 30-year time periods, beating out cash and inflation by anywhere from 4% to 10% annually. 4. There hasn’t been a single 30-year period where cash has been a better investment than stocks or where stocks didn’t grow purchasing power. What does this mean? As we think about how tenuous investing a pile of cash into the stock market seems today, take comfort in knowing that you (and your advisor) don’t know what’s going to happen next year and as long as your investment horizon is longer than 6 years, the odds are in your favor that you’ll end up growing your wealth. Read more on our blog by Erich Yost, CFA

May’s market performance was punctuated by all three U.S. equity indexes recording record highs. With 10 of 11 sectors showing growth, an air of optimism carries stocks forward as summer nears. Read the monthly market recap for more insights.