Never Bet Against America
“Never Bet Against America”-Warren Buffet It may be the smell of barbecue, the sunshine on a lake, or watching Joey Chestnut win his 16th Nathan’s hot dog eating contest that makes us all a bit more patriotic. The fourth of July is a reminder of the freedoms we are lucky to have and provides a moment of reflection for investors as we have reached halftime for the global markets. The first half of 2023 was a pleasant surprise for many as global equity and bond markets rose across the board rebounding from a difficult 2022. Artificial Intelligence (AI) remains the focus for many market participants as the leaders continue to be tied to its growth prospects. The S&P 500, NASDAQ, and Dow Jones are up 16.9%, 32.3%, and 4.9% respectively year-to-date (YTD). The major contrast and performance dichotomy between the NASDAQ and Dow Jones can be partly attributed to the style tilts of the indices. The value tilt of the Dow Jones provided ballast for the index in 2022 as it outperformed on the downside, but the index trails this year due to its lower correlation to the AI trade. However, regardless of the US equity index, it’s been America’s ingenuity and strong labor market that continues to push equities higher and reminds investors to “Never Bet Against America” (Warren Buffet). As we look out into the quarters and years ahead, we may be in for a choppier equity market than the first half of 2023. The Federal Reserve continues to fight elevated inflation with higher interest rates putting pressure on the growth of the US economy. We believe interest rates may remain higher for longer, benefiting wealth distributors with higher yields and lower risk, but creating a challenge for housing and small business loans due to the rising costs to service debt. It is in moments like these where we need to continue to remind ourselves of our investing principles. Wall Investing Principles: 25 – Spend less than you make 72 – Start investing and be consistent 8 – Invest for the long-term 4 – Actively stick to your Plan We push our clients, family and friends, and our community to actively stick to their financial plan. We created our “Wall Principles” to make the complex simple and will provide more details around our wall principles in future blogs and commentary. We look forward to our next conversation to review your financial plan or possibly create one for your family, to see how our wall principle may help you build a strong financial foundation. We thank you for your continued support of our firm. As always, “you do the dreaming, we’ll do the math.”
Alone With My Thoughts – 06/26/2023
“We would be careful not to give in completely to FOMO (fear of missing out), as a skipped hike is not a pause, inflation still handcuffs the Fed…” Benjamin Bowler, BofA Securities. The FOMO is definitely out there, what with Morgan Stanley upgrading Nvidia, this past Friday no less, to overweight. Thanks for the update guys, the now trillion dollar chipmaker’s stock is up 193% year to date. And FOMO is finally reaching out to the broader market, with all 11 S&P 500 industry sectors up during the month of June. It may be ok to join the party now, who doesn’t like a good party, but again, they say nothing good happens after midnight…
Alone With My Thoughts – 06/01/2023
“When you come to a fork in the road, take it.” Yogi Berra. The stock market road typically has plenty of forks to take, but this year we have seen a road that gets narrower and narrower. For example, If not for the seven largest tech stocks, the S&P 500 would be negative for the year and not up over 9%. The AI inspired gold rush into tech has been pretty remarkable and continues with the recent push in Nvidia, now a Trillion dollar company. Narrow stock market leadership has not always bode well for diversified portfolios and we need to battle the FOMO of the artificial intelligence crowd. Sometimes it is good to stay in your own lane.
Alone With My Thoughts – 05/22/2023
Home buyers are feeling a bit like Hannibal Lecter, what with homeowners handcuffed to low mortgage rates. A recent Wall Street Journal article by Nicole Friedman, pointed out that the reluctance of these homeowners to sell differentiates the potential downturn in housing from other periods of rising interest rates. This idea of going from a historically low interest rate to a much higher one will most likely stunt the supply of homes for the near future. As of March 31, nearly two thirds of primary mortgages were at rates below 4%. For investors, the net effect could provide an opening for builders, an opportunity for home remodeling, and possibly dull the Fed’s attempt at to slow inflation. Moral to the story, interest rate moves, both up and down, are not without unintended consequences.
Alone With My Thoughts – 04/28/2023
The tech heavy Nasdaq has been leading the way in 2023 after a horrendous prior year performance. As we leave the month of April, the Nasdaq has gained about 16% year to date, led by familiar big tech names like Amazon, Meta, Google, and don’t forget Microsoft. The sales numbers have been impressive…Amazon clocking in with over $100 billion in quarterly sales, Google (Alphabet) with more than $60 billion, and Microsoft with over $50 billion. As the arms race for AI takes off, there seems to be cash available for the perceived next big idea. At the midway point of earnings season, about 75% of companies have beat expectations and through the first quarter, $77 billion has flowed into equities. This, along with tight employment, will hopefully portend a “soft landing” for the economy and maybe even softer inflation rates.