If you were a fly on the wall overhearing our discussions about stocks, bonds, real estate, commodities, cash, and other investable assets you could be in jeopardy of dying of boredom. While we don’t find these things (and economic issues) dull, themes sometimes drag on and on tediously. Current themes include: Interest rates (“higher for longer” or dropping before year end?); concentration within a very few companies (formerly called “The Magnificent Seven”); residential real estate impasse; and, of course, all things “AI”, to name a few.
In our opinion, these and the upcoming election have created a bit of a stalemate, albeit a healthy and necessary one. The underlying economy is relatively stable, and consumption remains surprisingly resilient, both in spite of higher interest rates and inflation. (By “higher”, we mean compared to the previous decade. Compared to the previous half century, neither are extraordinarily high.) As we have mentioned previously, sometimes stock market volatility is its way of resting in place, consolidating, and/or assimilating all of the competing factors. Sometimes the “talking heads” refer to it as “range bound”.
While we have experienced similar times before, rarely if ever has it felt so…satisfying. To a certain extent diversified, balanced portfolios are holding up well and with compelling reasons to expect them to continue as such over the next few months if not years. While the aforementioned handful of stocks may presently be overvalued, they represent profitable companies with compelling outlooks. And on the fixed income side, while interest rates and dividends may have peaked, by extending duration and maintaining our hold-until-maturity philosophy on our managed accounts, we hope to benefit from higher income for several more years.
Residential real estate continues to be a conundrum across the country. You no doubt know the story if not personally experiencing it: Inventories remain low because people don’t want to sell because they don’t want to give up their low mortgage rates. This has uniquely extended the “seller’s market” and supported valuations. We all know people who would like to move and probably will when this “stalemate” finally ends.
Cryptocurrency and Artificial Intelligence are more than mere buzzwords–they are paradigm shifts. (Frankly, we find the underlying blockchain more compelling and less a “buzzword” than cryptocurrency.) As a matter of fact, they aren’t just coming, they are here and have been for years. In a rudimentary way, one can think of blockchain as a new, presumably superior and more efficient way of tracking ownership, in other words, an “advanced” ledger. Likewise, one can think of AI as a more personalized and customizable search engine…again, VERY rudimentary description.
This is a short list of behind-the-scenes topics that veteran, pragmatic investors have to consider. Like you, we have personal feelings about what is and is to come, but we have to play with the cards we are dealt, which brings us to the elephant in the room: the upcoming elections. Six months from now we will know who the president and congressional people are. We cannot predict what “cards” we’ll be dealt (pun intended), but what we will predict is that a mere year from now we will be back to living our lives as will the capital markets.
Any opinions are those of Steve Gideon and not necessarily those of Raymond James. There is no guarantee that the statements, opinions, or forecasts provided in this article will prove to be correct.
Expressions of opinion are as of this date and are subject to change without notice. Every investor’s situation is unique, and you should consider your investment goals, risk tolerance, and time horizon before making any investment. Investing involves risk and you may incur a profit or loss regardless of strategy selected. Past performance does not guarantee future results. Raymond James and its advisors do not offer tax or legal advice. You should discuss any tax or legal matters with the appropriate professional.
Prior to making an investment decision, please consult with your financial advisor about your individual situation. The prominent underlying risk of using bitcoin as a medium of exchange is that it is not authorized or regulated by any central bank. Bitcoin issuers are not registered with the SEC, and the bitcoin marketplace is currently unregulated. Bitcoin and other cryptocurrencies are a very speculative investment and involve a high degree of risk. Investors must have the financial ability, sophistication/experience, and willingness to bear the risks of an investment, and a potential total loss of their investment.
Midyear Thoughts on Capital Markets
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If you were a fly on the wall overhearing our discussions about stocks, bonds, real estate, commodities, cash, and other investable assets you could be in jeopardy of dying of boredom. While we don’t find these things (and economic issues) dull, themes sometimes drag on and on tediously. Current themes include: Interest rates (“higher for longer” or dropping before year end?); concentration within a very few companies (formerly called “The Magnificent Seven”); residential real estate impasse; and, of course, all things “AI”, to name a few.
In our opinion, these and the upcoming election have created a bit of a stalemate, albeit a healthy and necessary one. The underlying economy is relatively stable, and consumption remains surprisingly resilient, both in spite of higher interest rates and inflation. (By “higher”, we mean compared to the previous decade. Compared to the previous half century, neither are extraordinarily high.) As we have mentioned previously, sometimes stock market volatility is its way of resting in place, consolidating, and/or assimilating all of the competing factors. Sometimes the “talking heads” refer to it as “range bound”.
While we have experienced similar times before, rarely if ever has it felt so…satisfying. To a certain extent diversified, balanced portfolios are holding up well and with compelling reasons to expect them to continue as such over the next few months if not years. While the aforementioned handful of stocks may presently be overvalued, they represent profitable companies with compelling outlooks. And on the fixed income side, while interest rates and dividends may have peaked, by extending duration and maintaining our hold-until-maturity philosophy on our managed accounts, we hope to benefit from higher income for several more years.
Residential real estate continues to be a conundrum across the country. You no doubt know the story if not personally experiencing it: Inventories remain low because people don’t want to sell because they don’t want to give up their low mortgage rates. This has uniquely extended the “seller’s market” and supported valuations. We all know people who would like to move and probably will when this “stalemate” finally ends.
Cryptocurrency and Artificial Intelligence are more than mere buzzwords–they are paradigm shifts. (Frankly, we find the underlying blockchain more compelling and less a “buzzword” than cryptocurrency.) As a matter of fact, they aren’t just coming, they are here and have been for years. In a rudimentary way, one can think of blockchain as a new, presumably superior and more efficient way of tracking ownership, in other words, an “advanced” ledger. Likewise, one can think of AI as a more personalized and customizable search engine…again, VERY rudimentary description.
This is a short list of behind-the-scenes topics that veteran, pragmatic investors have to consider. Like you, we have personal feelings about what is and is to come, but we have to play with the cards we are dealt, which brings us to the elephant in the room: the upcoming elections. Six months from now we will know who the president and congressional people are. We cannot predict what “cards” we’ll be dealt (pun intended), but what we will predict is that a mere year from now we will be back to living our lives as will the capital markets.
Any opinions are those of Steve Gideon and not necessarily those of Raymond James. There is no guarantee that the statements, opinions, or forecasts provided in this article will prove to be correct.
Expressions of opinion are as of this date and are subject to change without notice. Every investor’s situation is unique, and you should consider your investment goals, risk tolerance, and time horizon before making any investment. Investing involves risk and you may incur a profit or loss regardless of strategy selected. Past performance does not guarantee future results. Raymond James and its advisors do not offer tax or legal advice. You should discuss any tax or legal matters with the appropriate professional.
Prior to making an investment decision, please consult with your financial advisor about your individual situation. The prominent underlying risk of using bitcoin as a medium of exchange is that it is not authorized or regulated by any central bank. Bitcoin issuers are not registered with the SEC, and the bitcoin marketplace is currently unregulated. Bitcoin and other cryptocurrencies are a very speculative investment and involve a high degree of risk. Investors must have the financial ability, sophistication/experience, and willingness to bear the risks of an investment, and a potential total loss of their investment.