Dear Client, Partner, Prospective Client,
Have we ever had a year where the markets rose with great distinction for the first six months and then proceeded to give back half of those gains in the next quarter? I’m sure we have, but that’s two very different extremes. Part of the reasoning for this pullback is that bonds have almost never been worse and it’s difficult to find sustainable yields in a variety of instruments. When money market rates, CD’s and other cash alternatives seem like a better place than bonds, it makes things challenging. Combine that with an inflationary environment slowly improving and you get unsteadiness in the markets. It appears that the volatility may continue for the duration of 2023 and the talks of a recession for the last two years are being revisited once again. Tighten your seatbelts as there may be some turbulence before that soft landing, we are all hoping for.
The September jobs report came in well above expectations at 336,000 for non-farm payrolls and unemployment held steady at 3.8%. Economists had estimated that 170,000 jobs would be added, so it appears that the labor market still has some tread on the tires.
Will the Federal Reserve raise rates again? The Fed is nearing an end to the aggressive rate hike campaign but said it wouldn’t hesitate to move them up once more if the economy and inflation didn’t show evidence of cooling down on a sustained basis. Every time chairperson Powell speaks, it seems to cause uneasiness in the markets. The less he says, the better.
It will be interesting to see what earnings projections materialize versus any type of technology and AI momentum that may arise for the last quarter of 2023. Will Nvidia, Microsoft and others lead the way with AI excitement or gloom depending on how you view this. Some experts predict a tech boom for the fourth quarter and others talk about a recession.
Our cybersecurity plays with Palo Alto Network (PANW), travel positions with Booking Holdings (BKNG)and Royal Caribbean (RCL), and automotive or EV plays with Ferrari (RACE), Ford (F) and Tesla (TSLA) continue to lead the way in 2023. There have been some missteps as well, but the changes made are for long-term growth potential and companies we see great potential with.
It is an election year in 2024 and historically this is a very good year for the markets. Whether you like the candidates coming down the road or the sitting President, we should all embrace a potential run-up in the markets for 2024.
Sincerely,
J.B. L’Esperance, ChFC
If you have questions about our strategies or would like to open an account with Barking Sands Capital, please give us a call at 952.500.8854 or 248.687.1400 or email us at jb@barkingsandscapital.com