Outlook publication for the first quarter 2024 detailing our investment strategies.
Giving Thanks (And Talking Drama)
The holiday-shortened week was chock full of drama … all centered around both the market’s current mania (artificial intelligence) and the market’s favorite pandemic era mania (cryptocurrency). A strong third quarter earnings season, favorable inflation data and a moderation of long-term interest rates have all contributed to a stellar month for the stock market which is now within 5% of its all-time high, which was reached in December 2021. We will all be giving thanks if recent momentum continues into the end of the year.
Early Holiday Cheer
Further evidence of slowing inflation amid moderating retail sales lent additional credence to the economic soft landing narrative this week, exactly 18 months after the Federal Reserve began raising interest rates to combat high prices. Meanwhile, retailers book-ended third quarter earnings season in generally encouraging fashion, putting finishing touches on a surprisingly upbeat reporting period that now tallies positive revenue growth for the S&P 500 and over 6% earnings per share expansion.
Legends of the Fall
We have consistently messaged our belief the Fed would accomplish its goal to bring inflation down to 2%, and this week’s latest reading on its preferred measure of the price level supports our thesis. The core version of the personal consumption deflator moderated again in the August reading, rising 3.9% from last year’s level, in line with expectations and moderating from the 4.2% increase registered in July.
Changing of the Guard
In an otherwise quiet week on Wall Street, the benchmark S&P 500 turned the page on one of its longest-running bear markets. Rebounding by over 20% from its October lows, the blue-chip index has officially surpassed the threshold marking a new bull market. What is notable about the advance from last fall’s lows is how few stocks have participated in the upturn.
Market Letter: Stalemate
Higher for Longer
That a notable Silicon Valley bank failure could overshadow significant developments in the labor market is a testament to how attuned investors remain to the unpredictable consequences of the Fed’s ongoing campaign to raise interest rates.
2023 Investment Outlook Video
Annual presentation from Ferguson Wellman investment team discussing the major themes facing capital markets in 2023 and how they will affect client portfolios.
Turning the Page
After being caught flat-footed by inflation last year, the Federal Reserve maintains a steely resolve to ensure that the beginnings of slowing inflation witnessed last fall continue in 2023. Following the stock market’s worst year since 2008 and the worst year ever for bonds, investors are hoping for better days in 2023.
Higher Rates to the Rescue
With second quarter earnings season complete, a relatively quiet week of company specific news was supplanted by central bank action in the European Union and Canada, with both raising their short-term interest rates by three-quarters of a percentage point. The European Central Bank (ECB) has now lifted rates off the zero bound, to 0.75%, but is behind both the U.S. Federal Reserve and the Bank of Canada in the amount of tightening already implemented.
Tug of War
Investors buffeted by the ongoing correction in stocks and bonds could be forgiven for asking this question. The Fed’s aggressive half a percentage point increase in interest rates last week coupled with another report of elevated inflation earlier this week are serving to continue the turbulence investors have experienced so far this year.
Back in Black: the Resurgence of Oil
Shawn Narancich, CFA, shares our thoughts on the issues of oil supply and demand and our outlook for the energy sector.
Second Quarter 2022 Market Letter Publication: Kryptonite
The second quarter 2022 issue of Market Letter, our quarterly investment publication, titled, Kryptonite.
What Really Matters
With an eventful first quarter now in the history books, we can safely say that the elevated levels of volatility that we predicted for 2022 are now in play.
Under Pressure
Our 2022 Investment Outlook features the Superman and Clark Kent theme, a metaphor referencing past extraordinary economic stimulus provided by the Federal Reserve and the U.S. government during the COVID-19 pandemic, as well as the supercharged earnings growth that served as a key tailwind for stocks last year.
Outlook 2022: Extraordinary to Ordinary
Turning of the Tide
In one of the most anticipated weeks of monetary policymaking in recent memory, the Bank of England became the first major central bank to raise interest rates off the near-zero bound and the U.S. Federal Reserve laid the groundwork for such a move by proclaiming the impending conclusion of its quantitative easing (QE) stimulus program by next March.
Changing Seasons
As autumn dawned this week, investors witnessed the first move by a developed market’s central bank to raise interest rates since the COVID-19 pandemic began. No, the Fed didn’t raise rates. Rather, it was Norway’s central bank that moved its short-term interest rate target off the zero bound, citing improved economic activity that no longer justifies such monetary policy accommodation.
Breakthrough Earnings
A week that began with the sharpest pullback in equities since last fall concluded in remarkable fashion, as investor concerns about the economic repercussions of rising COVID-19 infections gave way to an increasingly constructive second quarter earnings season.
Easing Into Summer
A quiet week on Wall Street feels like just what the doctor ordered ahead of the long Memorial Day weekend. Stocks remain well bid and within striking distance of new highs ahead of what will be a busier week of economic data.