We have continued to invest surplus cash in clients’ accounts and now can be considered fully invested in most portfolios. While there are many issues concerning investors, the bearish sentiment has presented the opportunity to invest now. Waiting for “good news” is not a good investment strategy as prices will be much higher. Our favorite technical contrarian indicator, the put/call ratio, has correctly guided us again.
Since the beginning of the year, short-term bond yields have inched higher as expectations of a few more interest rate increases by the Federal Reserve have pushed rates higher. Longer-term bond yields have declined in anticipation of lower inflation and economic activity over time. Stocks have been led by the falling bond yields and are trending higher despite the risk of lower corporate earnings.
The big factor in the financial markets remains the Federal Reserve policy. Today, they raised short-term interest rates (Fed Funds) by .25% to 4.50% to 4.75%. Comments by the Federal Reserve chair Jay Powell, suggest the end of interest rate hikes are near. With inflation moderating and economic data slowing, and oil and natural gas prices falling, most of the rate hikes are already in place.
Within client portfolios, we are shifting positions to the emerging trends taking place. Many of last year’s best performers are this year’s laggards and vice versa. With long-term interest rates declining, growth stocks and smaller companies are performing better than the overall stock market.
Thanks for your interest,
Andy, Jennifer, Elicha & Aiden