I hope this letter finds you well. I am writing to provide you with our latest insights and perspectives on the current financial landscape and how it may impact your portfolio in the coming months.
Fed Interest Rate Predictions
Our analysis indicates that the Federal Reserve is likely to commence cutting interest rates at their September meeting. With the battle against inflation largely won, the Fed’s focus is expected to shift towards mitigating the risk of rising unemployment. We anticipate this policy shift will generally be positive for stock prices, although we should be prepared for some volatility as the market adjusts to the new reality.
Political Landscape and Market Impact
The recent assassination attempt, fortunately unsuccessful, is unlikely to disrupt the ongoing upward trend in stock prices. While a successful attempt would have had a negative impact, the current scenario may actually bolster support for the former President’s campaign.
Regarding the upcoming November election, our view is that the stock market will continue to rise regardless of the victor. Specific stocks, often aligned with one candidate or the other (“Trump” stocks and “Biden” stocks), may experience volatility leading up to and following the election. Nevertheless, the broader market remains poised for growth, reflecting an overall positive economic trajectory.
Earnings Season Outlook
As earnings season unfolds, we expect most companies to report solid results. However, it is likely that many management teams will express caution about future prospects due to concerns over interest rates, consumer sentiment, and economic uncertainty. This caution may lead to a temporary moderation in stock prices through the third quarter.
Market Broadening and Investment Strategy
A notable trend we anticipate is the broadening of the market. The S&P 500 Index’s recent performance has been driven by a narrow group of large-cap stocks, such as Nvidia, which alone has contributed a significant portion of the Index’s return. Historically, a rally supported by a diverse range of stocks across various market capitalizations indicates a healthier stock market.
This broadening trend presents a positive shift, as investors begin to recognize value beyond the “Mega caps” like Nvidia, Microsoft, Apple, Meta, Alphabet, Broadcom, and Amazon. We expect this broadening to continue, potentially extending the current market rally.
Seasonal Market Trends
We are currently in a period that has historically shown the weakest returns for stocks over the past 25 years. August and September often bring heightened volatility, which I have observed numerous times over my 30-year career. However, this volatility should not concern long-term investors. At KIG, we view this period as an opportunity to strategically deploy capital or adjust our portfolios in preparation for the historically strong fourth quarter.
In conclusion, while we anticipate some near-term volatility, our overall outlook remains positive. We believe in the resilience of the market and the opportunities it presents for strategic growth. As always, we remain committed to navigating these fluctuations with a steady hand and a focus on your long-term financial goals.
Please feel free to reach out if you have any questions or if there is anything specific you would like to discuss regarding your portfolio.
Past performance does not predict future results.
Warm regards,
Kessler Investment Group
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.