Investors appear to be exceedingly hopeful a rate cut will salvage their financial plans. The markets are stirring, and uncertainty abounds. Markets don’t like uncertainty, and that likely will prevail for the rest of the year.
Themes and thoughts to note:
The election is top of mind for everyone, and while talking politics is something to avoid, I will make these comments. Both candidates seem to be discussing ideas about the generation of more tax revenue, which means both parties are aware of the growing deficits. Neither party is going to address changes needed for social security or Medicare/Medicaid that directly affect some voters, so we’re left with trying to align our country’s needs, notably military spending. I suspect that the politicians will avoid saying anything specific before the election, mostly trying to portray the other candidate as incompetent. I believe both are competent enough to get us through the next 4 years.
Sun belt migration might be slowing due to higher mortgage rates, weather concerns, availability and affordability of insurance along with a surge in real estate prices. There is a growing shortage of housing and finding investments that will benefit from these trends seems prudent.
Innovation is running at record pace and we continue to expect the disruptors to unseat the complacent. Trillions are expected to be handed down after taxes as aging wealth is transferred. Younger heirs might be more interested in innovation and continue to fund the venture appetite. Funding of these types of investments ebbs and flows, yet seasoned investors in venture capital expect that to occur.
The number of publicly traded securities is stagnant with merger and acquisitions activity growing and the lack luster IPO market yet still to get active, although I would expect this to change eventually. Private investments definitely are becoming more available to a wider investor audience as demand rises for alternative investments.
The smaller capitalization companies have underperformed for many years, often for good reasons, but that seems to be showing signs of ending and we continue to find value in many of these mostly ignored companies.
Bitcoin, silver and gold are finding their way into more portfolios now, with Bitcoin poised to continue to take the lead from precious metals. Media, mostly understandable, continues to spend time on the very largest companies and they continue to be quite popular with investors. Historically, these companies at some point in their lifecycle peak and are replaced with another generation of technology companies. Nothing seems to be happening at this time for this to occur, but experience tells me something might be happening we just aren’t aware of yet.
Knowing that many of the younger investors today have not experienced the more severe corrections markets historically suffer, one of these days they will learn, and we will remember. It is never fun to go through but for now we continue to see value. Timing the markets is a difficult game, but trimming investments occasionally allows having cash to take advantage of weakness, this makes the unpopular corrections have more purpose!
So, I mention AI, as the abilities created hopefully will help keep us healthy and alive longer, prevent us from common mistakes in jobs, purchases, investments, and open us up to understand areas we might have an interest that were previously never discovered, and much more.
In closing, while uncertainty may reign in the short term, prudent planning and a long-term perspective can help navigate the complexities of the market and turn challenges into opportunities. Let's remain focused on the fundamentals and continue adapting as we move forward. *
*Speaking of AI, the closing paragraph above was written by ChatGPT. We loaded the letter into their platform, and they suggested that paragraph. While not our style, it’s a good example of where the world is headed. Would love to hear your thoughts.
