Nick Pirsos, Wealth Advisor at MRA Advisory Group, published his updated view of equity markets. You are invited to schedule a complimentary first meeting (via the link below) to discuss his views in greater detail and to learn how to best optimize your portfolio to better attain your retirement goals.
Significant Equity market performance dispersion unfolded in October (thru 10/28). On the plus side, US, European and Japanese stocks benefitted from increased prospects of both slowing inflation and expected interest rate rises. The results ranged considerably from 2% in the UK, which was adversely impacted by the short tenure of Prime Minister Truss and related economic policy decisions, to 10% advances in Continental Europe, which was being seen as a near-term relative safe haven.
Conversely, Chinese markets remained focused on the absolute level of elevated interest rates and the corresponding foreign currency weakness of the Yuan, resulting in stock market declines of 4% to 14%.
These factors, coupled with a pinch of US upcoming election uncertainty, led to the biggest dispersion of monthly global market returns in quite some time totaling 22%. Despite, October’s broad recovery, YTD most global stock markets remain down in the mid to high teens.
Has the Bull Market Arrived?
The S&P500 and European indices could be foretelling an all-clear signal, but as we noted last month, at a minimum we believed in the near term, we entered an opportunistic trading period for equities. And from a longer-term perspective, we viewed stock values as attractive but more was needed for a shift in our fundamental view. That remains our base case and while ToTo is on the journey, he has not arrived in Kansas just yet.
One item of concern is the rapid strength of the US Dollar, which we view as a good proxy of US Fed Chairman Powell’s monetary tightening effectiveness.
What remains unclear is the Chairman’s motives in driving King Dollar. Is it inflation fighting, or defending the USD as the world’s reserve currency, or geopolitical events and/or all of the above; and by extension, more importantly, the duration of his plan? The European Central Bank’s knees buckled somewhat in October owing to Credit Suisse’s liquidity concerns and began relaxing its tightening mandate. Is Chairman Powell also waiting for a circuit breaker moment in the US or will recent global events begin to yield some treats?
The longer Chairman Powell remains tight-fisted, the greater the likelihood 2023 earnings expectations will have to be revisited downward. The current consensus EPS estimate for next year is an achievable mid-single digit. A forced recession however could see, based on recent history (table below), an earnings expectation negative swing of 10%, which would likely delay the start of the next bull market. A witch’s Fiscal and Monetary policy brew of heart, brain, and courage is presently needed to rekindle sustained investor spirits. Next week’s US election may tackle the former, eyes of newt remain on the latter.
ACTION PLAN: Now is the time to start planning year-end 2022 tax-selling strategies and developing investment views for 2023. Unsure where to begin? Let us Help.
We can assist with:
- Strategies to mitigate monthly equity volatility.
- Identifying your portfolio’s current expected risk/opportunity level.
- Capital gains tax optimization.
- Or any other personal Financial Planning and Retirement Savings needs including Insurance (Life, Disability, Group Health), College Planning/529 Plans, Wills and Estate Planning.
- Small Business owners, we can help you with employee retention by creating low-cost 401K and Pension Plans and Group Medical Health Insurance.
Feel free to share our views with family or friends who are also confronted with these important Wealth Planning decisions. MRA Advisory Group and I are ready to discuss all your investment concerns to best position your Retirement Goals.
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Advisory Services are offered through MRA Advisory Group, a Registered Investment Adviser. This information was developed by Broadridge, an independent third party. It is general in nature, is not a complete statement of all information necessary for making an investment decision, and is not a recommendation or a solicitation to buy or sell any security. The investments and strategies mentioned may not be suitable for all investors. Past performance is no guarantee of future results. Nothing herein, nor any attachment, shall be considered to constitute (i) an offer to sell, nor a solicitation of an offer to purchase, any security, or (ii) tax or legal advice.