Are we at the start of a new bull market? Is FAANG striking back after abysmal performance in 2022?
A couple of weeks ago I wrote to you about market trends I am watching, specifically around growth stocks and the recent A.I.-fueled rally in tech companies.
Around the same time frame I released a more in-depth blog and podcast episode on the difficulties of stock picking and how to develop an investment discipline. You can read the blog and listen to the episode here.
Over the past couple of weeks the market rally has continued to march forward at a mostly steady pace, although much of the gain is coming from just a few companies. In fact, many of the companies that drug down the markets last year are the same ones giving us a boost so far in 2023.
While stocks have been moving higher for most of this year, the big boost came near the end of May, thanks to the earnings call from Nvidia (NVDA), during which they forecasted higher earnings and semi-conductor demand/production due to rapid advancements in A.I.
In fact, 18 of the companies listed on the above chart are involved with A.I. and semi-conductors.
The good news is clients of Life Moves Wealth have ownership of and/or exposure to these companies. In fact, one of the long-time core holdings in our portfolios is the iShares Seminconductor ETF, ticker SOXX, which as of today is up 39.97% YTD.
If we look beyond growth and tech companies, it appears the S&P 500 broke out and crossed back into technical bull market territory last week with a confirmed rally of +23% from the October ’22 low.
Upon reading excerpts from some of the recent corporate earnings calls, many companies are sounding increasingly optimistic about the remainder of 2023. Consumer spending is still holding on, foreclosures are lower than pre-pandemic trends, the labor market remains strong, and core inflation has come way down from one year ago. Lastly, the Fed is likely near the end of this rate hike cycle.
Speaking of the Fed, they meet this week and are largely expected to pause on rates; however, expectations for one more hike in July have been seen as high as 70%. On the other hand, if inflation shows steadiness or declines for the May and June reports, it is likely the Fed will continue to pause to see how much the prior rate hikes have yet to filter through the economy.
The markets and our portfolios are much easier to talk about than just about any point since mid-2021. Even as such, at this time I am not suggesting any major changes in portfolios and, as you well know, I do not advocate chasing the hottest returns.
Clients of Life Moves Wealth will see portfolios continue to be titled to cautious optimism. Our allocation is still titled a little more to value than to growth; however, historically I have allocated with a heavier tilt to growth stocks.
BUT – games are still being played that we need to watch closely…
The U.S. government just suspended the debt ceiling and promptly added another +$350B of debt last week. An election cycle is soon to begin. Democrats appear to be sticking to their candidate – for better or for worse – and who knows who the GOP will tout. There’s still money going from US taxpayers to all things Ukraine. China is doing China things. OPEC is moving oil production around.
That said, I will continue to nudge the portfolios back toward growth on the optimism of a better earnings outlook for companies investing capital into technologies, health care advancements, energy, and smart land use. The best way to participate in a bull market is through a solid investment discipline.
Have questions about your investments, the amount of risk you’re taking, or how it all fits into your financial health monitoring and goals? Click here to schedule time with me.
Charts used in this post are from “The Week in Charts” by Charlie Bilello. Click here to receive Charlie’s weekly newsletter in your email (free). Follow Charlie on Twitter.
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