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As for interest rates, the late 2023 forecast of 5-6 Fed Fund rate cuts is now off the table. But with “cooler” inflation readings coming out this morning (mainly due to lower gasoline prices brought about by lower demand), the prospects of a rate cut or two is still front and center. We view the chance of lower interest rates as a positive for stocks and bonds in the short-term, but if the driving reason for lowering rates is due to America’s stalled or slowing economy, then our appetite for risk will wane. We believe a possible market selloff is still a way out into the future as both the U.S. GDP and the job market remain resilient.
Our client portfolios in large have been benefactors of ownership in the strongest sectors of the AI market (Nvidia is a huge winner here) as well as the GLP-1 boom (of which Eli Lilly is the clear winner). The truth is that while these thematic stock sectors have done exceedingly well, the rest of the market has plateaued, even as the broader market makes new all-time highs, with new market highs being marked even today. It has in fact been one sweet summer thus far, but we’re very mindful that much of this recent upswing could be somewhat short-lived - some may even say “artificial” - whether it’s driven by a frenzy in AI or forecasts for yet-to-come interest rate cuts.
We’ve been able to thread the needle and create a “Goldilocks” scenario with most of our portfolios. We own great companies where our conviction is high (as are appreciated prices), and in many cases we’re holding nearly 20% in cash and money market. If the market continues to rally, we expect to continue to participate in a very attractive way, but if the market sours, our cash and more defensive positions will play their part to protect account values as the market moves lower.
We hope you’re out enjoying a sweet summer and that you found this commentary of interest and value. Please offer any comments or feedback as we always appreciate hearing from you!
Emory
P.S. I wrote this just prior to CNBC’s “tradition” of bringing Jeffrey Gundlach on TV. He (a bond fund manager) always serves as a wet blanket on a strong stock market day. I really wish they’d bring him on afterhours, but they’re not asking me about programming, unfortunately. Can you tell I’m not happy about it?!
Emory G. Hendrix, Jr., AAMS
Financial Advisor / Crescent Wealth Management
A: 124 Verdae Blvd., Ste. 105, Greenville, SC 29607
D: 864.729.4288 O: 864.464.9626
E: emory@crescentwm.com W: www.crescentwm.com
Advisory services provided by NewEdge Advisors, LLC doing business as Crescent Wealth Management, as a registered investment adviser. Securities offered through NewEdge Securities, Inc., Member FINRA/SIPC. NewEdge Advisors, LLC and NewEdge Securities, Inc. are wholly owned subsidiaries of NewEdge Capital Group, LLC.
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