Dear Clients,
As we move through the heart of summer, we want to take a moment to reflect on what has been a dynamic first half of the year and share our thoughts on what may lie ahead.
From Volatility to Recovery
The markets endured a bumpy ride this past April, with significant volatility triggered by newly announced tariffs—what some have called “Liberation Day.” This uncertainty led to a nearly 20% decline in stocks from their highs. As we’ve said before, markets do not perform well during periods of uncertainty, and April was a clear example of that.
Fortunately, the mood shifted in May and June. Once it became clear that the tariffs were likely a starting point for negotiations—not a fixed policy—investors regained confidence. Markets rallied strongly, and the S&P 500 even reached new all-time highs, a notable achievement considering the turbulence earlier in the quarter.
Putting Market Swings in Context
It’s important to put selloffs like the one in April into proper context. We remain in a “growth” market cycle, which we believe began in 2016. In these types of cycles, market volatility tends to skew to the upside. While downturns are never pleasant, they are often followed by strong rebounds—as we’ve just witnessed.
That’s why, during periods of sharp market declines, we look for buying opportunities rather than reacting with fear. It doesn’t mean we ignore risks, but rather, we see them as reminders that markets don’t move in a straight line. We continue to believe that a time will come—perhaps 5 to 7 years from now—when selloffs may signal the need to reduce risk, when selloffs do not offer immediate buying opportunities. But for now, we remain focused on long-term growth.
What’s Driving the Market
Despite all the noise in the headlines, we believe the recent rally is more about solid fundamentals than politics. Corporate profits remain healthy, inflation is easing, global tensions appear to be moderating, and interest rates may be headed lower. These are all strong building blocks for continued market strength.
Most importantly, we see artificial intelligence (AI) as the central driver of long-term market performance. We continue to believe that AI will shape the future of nearly every industry and play a dominant role in driving stock returns for years to come.
Looking Ahead: Seasonal Shifts and Strategy Adjustments
Seasonal patterns suggest the market may take a breather as we move into late Summer and early Fall. With this in mind, we are taking steps to reduce exposure to some stocks in July—not out of fear, but to reposition and prepare for what we believe will be renewed opportunities as the year closes out.
Gold, Bitcoin, and the Flight to Safety
Gold has also grabbed attention lately. After a long period of underperformance (with zero gains from 2011 to 2023), it has surged 38% in the last year—well ahead of the 12% gain in the S&P 500. This move has drawn in investors looking for a hedge against inflation and economic uncertainty.
Much of this gold rally has been driven by concerns over U.S. debt levels and weakening of the U.S. Dollar. Foreign investors, who hold large amounts of U.S. debt, have shifted to gold and even cryptocurrencies like Bitcoin as alternative stores of value. While these trends have pushed prices higher, we view the current surge in gold as temporary. We expect prices—and the recent jump in interest rates—to stabilize soon.
Bitcoin has also seen a dramatic rise in recent weeks. While we do not invest directly in Bitcoin for our clients, we do monitor it closely and seek out opportunities in stocks that benefit from the same forces that have propelled Bitcoin to new highs. Interestingly, both Bitcoin and gold are moving higher together—an unusual but logical pairing given today’s unique environment. In our view, Bitcoin is a modern version of gold, fueled by technology and AI innovation, while gold continues to serve as a preferred asset for sovereign nations seeking dollar alternatives.
We expect both assets to cool off in the near term. That said, we believe they will continue to appreciate over the next 5 to 10 years. However, we maintain our conviction that equities—especially those tied to long-term growth themes like AI—will ultimately outperform.
Presidential Cycle and Market Behavior
Lastly, it’s worth noting that historical data shows markets often experience a lull in the third quarter of a presidential election year, followed by strength heading into year-end. While history isn’t a guarantee of the future, it supports our current strategy of remaining nimble while staying focused on long-term growth.
We remain committed to helping you navigate these markets with a steady hand and a clear eye on the future. If you have any questions, please don’t hesitate to reach out.
Past performance does not predict future results.
Warm regards,
Kessler Investment Group, LLC
All information in this presentation is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. All economic performance data is historical and not indicative of future results. The market indices discussed are unmanaged. Investors cannot invest in unmanaged indices. Certain statements contained within are forward looking statements including, but not limited to, statements that are predictions of or indicate future events, trends, plans or objectives. Undue reliance should not be placed on such statements because, by their nature, they are subject to known and unknown risks and uncertainties. Please consult your adviser for further information.
Opinions shared in this presentation are not intended to provide specific advice and should not be construed as recommendations for any individual. Please remember that investment decisions should be based on an individual’s goals, time horizon, and tolerance for risk.