Dear Valued Clients,
We hope this message finds you well. In light of recent market developments, we want to provide you with an update on our perspective and investment outlook. The speed at which interest rates have risen has undoubtedly placed stress on the stock market, with Bank and Utility stocks being particularly affected due to their close ties to interest rates. However, we firmly believe that the “fever is breaking,” and this market turmoil presents some of the most promising investment opportunities we’ve seen since the challenges posed by COVID-19 and the Great Financial Crisis.
Here are the key factors driving our optimism:
- Political Stability: The upcoming presidential election, just over 12 months away, is expected to bring about a sense of political stability. Regardless of the outcome, we anticipate a settling down of the craziness that will be on full display ahead of the election. The “cooler heads prevail” outcome that has characterized our nation’s history will soothe markets.
- Interest Rate Cuts: The Federal Reserve’s recent rate hikes have raised rates to levels that may necessitate future rate cuts to stimulate economic growth.
- Equal Footing for Savers and Investors: With interest rates now at levels not seen in over a decade, savers and investors are on an equal footing. This balanced environment is positive for those who allocate capital.
- Improved Capital Allocation: Higher interest rates compel capital allocators to be more prudent in their decisions. This stands in stark contrast to the easy choices made when rates were near zero.
- Falling Inflation: Inflation is already on a downward trajectory, despite the full effects of the Fed’s rate hikes not yet being realized. As inflation continues to recede, pressure on consumer prices and corporate profits will ease.
- Resolution of Outstanding Issues: Factors like the UAW situation and the war in Ukraine are also expected to see resolutions in the near future, potentially reducing uncertainty in the markets.
- Valuation Attractiveness: Both stock and bond valuations remain compelling and are likely to attract capital from investors seeking opportunities.
Furthermore, the recent downtrend in the market since July appears to be more consistent with a correction rather than the start of a new bear market. We had previously advised you to anticipate some short-term volatility, and we have positioned your portfolios accordingly by raising cash in anticipation of opportunities like the one we are currently witnessing. Our bullish indicators are flashing positively, and we remain committed to our disciplined investment process.
In terms of timing, we are closely monitoring the markets, and our plan is to act opportunistically next week when we believe we will see the optimal time to “pull the trigger” and deploy cash into both bonds and stocks. Our goal is to bring client accounts back to a “fully invested” position while maintaining a focus on prudent and strategic investments.
As always, we encourage you to reach out to us if you have any questions or concerns about your specific portfolio or this market commentary. We appreciate your trust in us and remain committed to helping you achieve your financial goals.
Thank you for your continued partnership.
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.