Quarterly Market Outlook Reports
Each Quarter, our team of portfolio managers meet to discuss the trends of the previous and upcoming quarter. We assemble the trends, the impact to our portfolios and discuss which moves are prudent for the coming weeks and months. And we deliver this analysis to you every three months.
Third Quarter, 2024
There have been a few October surprises. First, the tension in the Middle East exploded after Iran launched approximately 200 missiles into Israel that were successfully intercepted, but now the world is waiting to see how Israel will respond. Second, Florida Governor Ron DeSantis said that the damages from Hurricane Milton avoided a “worst case scenario,” despite the fact that Siesta Key, Sarasota and the Tampa baseball stadium sustained severe damage. Additionally, the economic uncertainty is also diminishing, especially in light of a recent big surge in the ISM service index. In fact, the Atlanta Fed is now predicting 3.2% annual third quarter GDP growth.
Second Quarter, 2024
The Wall Street hates uncertainty and fortunately, all of a sudden, everything is now much more certain. The Fed will be following other major central banks and cutting key interest rates no later than September 18th. Economic incentives are expected to be passed in Europe. The U.S. dollar has been amazingly strong, since the U.S. is expected to lead a worldwide economic recovery. A strong U.S. dollar can hinder multinational companies like the big stocks that dominate the S&P 500, however smaller, more domestic companies are poised to prosper!
As always, an investor’s best defense remains a strong offense. The expectations for the second-quarter earnings remain very high, with 8.8% forecasted …
First Quarter, 2024
The S&P 500 had the best start to the year in the first quarter in the past 5 years. The average stock in the S&P 500 posted fourth-quarter sales and earnings that were 1.3% and 6.7%, respectively, better than the analyst community had anticipated. These impressive results were aided by easy year-over-year comparisons.
However, the analyst community has been revising their consensus estimates higher in the wake of these impressive sales and earnings surprises.
I expect the next two quarters to also have favorable year-over-year comparisons, so we are especially optimistic for the first and second quarter announcement seasons. Furthermore, we …
Fourth Quarter, 2023
Treasury bond yield peaked at 4.99% and has since fallen dramatically. Furthermore, at the December Federal Open Market Committee (FOMC) meeting, the Fed revealed that the “dot plot” from all 17 FOMC members is signaling three rate cuts in 2024. Additionally, three to four rates cuts are anticipated in 2025 until key
interest rates hit 3.5% to 3.75%. So in total, the FOMC dot plot revealed six to seven key interest rates cuts are planned for 2024/2025.
What is really happening is the Fed has already hit its 2% inflation target. The Labor Department announced that the Consumer Price Index (CPI) rose 0.1% in November and 3.1% in the past 12 months. The CPI …
Third Quarter, 2023
The good news is that we survived September and the threat of a federal government shutdown. The bad news is that we started October with surging Treasury bond yields, so concerns over out-of-control federal spending persist. The federal debt ceiling was lifted with a 45-day funding plan, and when it has to be renewed in November, it should pass, since Congressional members like to go home for Thanksgiving.
The public fascination with government bond yields has gone viral. For example, Treasury bonds were recently #2 in Google’s search engine, behind only the Taylor Swift/Travis Kelce relationship. This is undoubtedly undermining …
Second Quarter, 2023
The breadth and power of the overall stock market improved notably in the second quarter. At the end of April, only eight NASDAQ stocks accounted for virtually all the S&P 500’s year-to-date return. At the end of May, twenty stocks accounted for virtually all the S&P 500’s year-to-date return as breadth and power improved. Then the annual June Russell reconstitution caused many small cap stocks to surge as liquidity improved.
The NASDAQ 100 (NDX) recently reduced the weight of its seven largest stocks by market capitalization and the other 93 stocks in the NDX index were the beneficiaries. The bottom line is the breadth and power of the overall stock market …
First Quarter, 2023
The first quarter had some dramatic developments but finished on a positive note. Thanks to the Silicon Valley Bank crisis, Treasury yields plunged and will likely cause the Fed to stop raising key interest rates. Although the Federal Open Market Committee (FOMC) raised key interest rates 0.25% as anticipated, this could be the last key interest rates hike.
At his press conference after the FOMC statement Fed Chairman Jerome Powell came off as dovish, which the financial markets like and responded positively. However, Treasury Secretary Janet Yellen was also testifying in front of Congress on Wednesday during Powell’s press conference …
Fourth Quarter, 2022
The fourth quarter started with several violent short covering rallies and helped to mark a definitive stock market bottom. Not only was October a strong month, but November also started on a positive note. The stock market temporarily lost its “mojo” in December after a hawkish FOMC statement and new interest rate fears emerged. The next Federal Open Market (FOMC) statement will be on February 1st, and we are anticipating a dovish statement due to moderating multiple inflation reports.
As you have repeatedly heard, the Fed never fights market rates, so if Treasury yields continue to moderate with better inflation reports, then the FOMC has to stop …