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July 2023 Client Letter

July 5, 2023 Dear Valued Investor, As we finalize the log on the first six months of 2023, we believe there’s value in reflecting on recent months gone by. Doing so can help crystallize key learnings and help chart a course through the rest of the year. Looking back on the first half of 2023, […]

July 6, 2023/by casey

June 2023 Client Letter

Client Letters

June 7, 2023 Dear Valued Investor, Every so often Washington likes to remind us how hard it can be to get things accomplished. The most recent example is the debt ceiling—the amount Congress can borrow to pay its bills. It seems like we have this debate every few years and in the end a deal […]

June 8, 2023/by casey

July 2023 Client Letter

Client Letters

July 6, 2023/by casey

June 2023 Client Letter

Client Letters

June 8, 2023/by casey

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July 2023 Client Letter

Client Letters

July 5, 2023

Dear Valued Investor,

As we finalize the log on the first six months of 2023, we believe there’s value in reflecting on recent months gone by. Doing so can help crystallize key learnings and help chart a course through the rest of the year. Looking back on the first half of 2023, it’s probably fair to say the outcome has been a bit better-than-expected for the stock and bond markets, especially compared to 2022’s tumult.

So, what major points have we learned through the first half of the year?

Inflation’s path is not endlessly higher. The return to some post-COVID-19 supply/demand normalcy and an ease in input costs have helped push the inflation rate down—which has helped both stock and bond markets bounce back.
Still-strong consumer spending and a stubbornly tight jobs market have helped the U.S. avert a recession…so far. The Federal Reserve continued to raise interest rates, but we believe they may begin reducing rates as early as Q4 2023 or Q1 2024.
Bonds look like bonds again. After enduring a generational period of weakness in 2022, bonds are back and should be considered important ballasts in a multi-asset portfolio.

Given what we have noted so far, we can now focus on the second half of the year. We’ve seen improvement in the bond market and positive returns, and believe there are still plenty of opportunities for both capital appreciation and attractive income generation—assuming both inflation and interest rates continue to glide lower, as we believe they will. For income-oriented investors, the bond market could offer an opportunity that has not existed in over 15 years.

Turning to stocks…the market has already put in some notable gains for the year. With recession risks still looming, investors may consider being less aggressive with their portfolios than they were the first half of the year. This doesn’t means stocks cannot go up from here, but rather that the risk/reward equation in stocks and bonds looks evenly balanced.

The key issue here is recession. We have already seen a push lower in corporate earnings expectations. Some weakening in manufacturing and services indicators, and early signs that the consumer could be slowing down, point to the likelihood of a mild recession to come. This view is reinforced by the expectation that the jobs market could weaken modestly through the end of this year.

Overall, the opportunities in the second half of the year may not be as robust as in the first half. However, after a bumpy 2022, investors should be encouraged that wading back into the market could bear some fruit in the coming months. In fact, the difficulty we witnessed last year likely helps lay the groundwork for further market stabilization as we press ahead. Despite our mild recession outlook, we believe there are still definitive investment prospects to uncover.

Please reach out to me if you have any questions.

Sincerely,

_______________________________________________________________________________________________________________________

Important Information

This material is for general information only and is not intended to provide specific advice or recommendations for any individual. There is no assurance that the views or strategies discussed are suitable for all investors or will yield positive outcomes. Investing involves risks including possible loss of principal. Any economic forecasts set forth may not develop as predicted and are subject to change.

References to markets, asset classes, and sectors are generally regarding the corresponding market index. Indexes are unmanaged statistical composites and cannot be invested into directly. Index performance is not indicative of the performance of any investment and do not reflect fees, expenses, or sales charges. All performance referenced is historical and is no guarantee of future results.

All data is provided as of July 3, 2023.

Any company names noted herein are for educational purposes only and not an indication of trading intent or a solicitation of their products or services. LPL Financial doesn’t provide research on individual equities.

All index data from FactSet.

The Standard & Poor’s 500 Index (S&P500) is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.

This Research material was prepared by LPL Financial, LLC. All information is believed to be from reliable sources; however LPL Financial makes no representation as to its completeness or accuracy.

Bonds are subject to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rates rise and bonds are subject to availability and change in price.

There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.

Past performance does not guarantee future results.

Asset allocation does not ensure a profit or protect against a loss.

For a list of descriptions of the indexes and economic terms referenced, please visit our website at lplresearch.com/definitions.

Tracking # 1-05374632

July 6, 2023/by casey

June 2023 Client Letter

Client Letters

June 7, 2023

Dear Valued Investor,

Every so often Washington likes to remind us how hard it can be to get things accomplished. The most recent example is the debt ceiling—the amount Congress can borrow to pay its bills. It seems like we have this debate every few years and in the end a deal is made, which is just what happened this time. Considering equity markets never really reacted to the drama, perhaps this is a good reminder that focusing on long-term objectives is the best strategy, even amid a fair amount of market noise.

With the debt ceiling drama behind us, markets will likely return their attention to topics such as inflation, the health of the economy, and the Federal Reserve (Fed)—who is scheduled to meet June 14-15. Expectations are that they will not raise short-term interest rates for the first time in 10 meetings. The Fed has done a lot of heavy lifting already—raising short-term interest rates by 5% in just over a year. Since rate hikes tend to have a long and variable lag, the Fed wants to see how those rate hikes more fully flow through the economy before its next move.

The Fed’s goal has been to elevate the fed funds rate and make the cost of borrowing money prohibitively expensive, to slow aggregate demand. While this has exposed some cracks in the regional banking sector, it should allow inflationary pressures to abate. But then what? After winning its fight with inflation, the Fed is expected to start cutting rates early next year. Just as the aggressive rate-hiking cycle took Treasury yields higher, interest rate cuts will take Treasury (and other bond market) yields lower. Both lower inflation and an end to rate increases could be welcome news for core bonds, especially intermediate core bonds, which have tended to perform well after rate-hiking campaigns. Investors may be better served by locking in these higher yields before they’re gone.

Only time will tell, but it feels like we’re finally on a path to lower interest rates and the end of this inflationary cycle. Of course there will be other challenges to deal with, that’s just the dynamic nature of the market. But in the meantime, returning to the familiar—lower rates and the end of inflation—is something we can all rally around.

Please reach out to me if you have any questions.

Sincerely,

Wayne Rigney

Important Information

All data is provided as of June 6, 2023.

All index data from FactSet.

This Research material was prepared by LPL Financial, LLC. All information is believed to be from reliable sources; however LPL Financial makes no representation as to its completeness or accuracy.

Bonds are subject to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rates rise and bonds are subject to availability and change in price.

There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.

Past performance does not guarantee future results.

Asset allocation does not ensure a profit or protect against a loss.

For a list of descriptions of the indexes and economic terms referenced, please visit our website at lplresearch.com/definitions.

Tracking # 1-05372704 (Exp. 06/24)

June 8, 2023/by casey

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July 2023 Client Letter

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