June 9, 2023

Growth Stocks Continue to Win in 2023

“Skate to where the puck is going, not to where it has been”, Wayne Gretzky.

The Consumer Sentiment Index hit a bottom in December 2022 at 59.7 and set the stage for investors looking forward to BUY beaten up growth stocks and participate in a great start to 2023. To date, the SP500 is up 12% and the (Nasdaq)QQQ is up a monster 33% for the year. Time and time again, markets teach us that buying last year’s winners and hoping for a repeat is not the best strategy. Value stocks outperformed in 2022 and it’s been all growth for 2023. We could pack it up and celebrate a great year, but there are still plenty of opportunities in front of us. While many market participants remained concerned about rising short-term interest rates, the debt ceiling drama and a looming recession, anxious investors cannot see the forest for the trees. To build generational wealth, you must focus on the long-term. Should investors worry about the banking system? I don’t think so. JP Morgan has more reserves plus equity than all bank loan losses combined during the Great Recession in 2008-09.

The consumer remains king to the U.S. economy...

How’s the consumer?

“Not to take issue with a popular coffee ad, but America runs on consumer spending,” JP Morgan economist Michael Feroli wrote Friday. “And consumer spending continues to run in the right direction, as this week’s strong April retail sales report confirmed.” “The consensus expects a recession starting next quarter, but the upside risk to this negative forecast is that consumers still have plenty of savings left,” Torsten Slok, chief economist at Apollo Global Management, wrote on Tuesday.

What a great time to be an American worker…

All-time new low unemployment rates in Alabama, Arizona, Arkansas, Kentucky, Maine, Maryland, Mississippi, Ohio, West Virginia and Wisconsin

And as economic growth pushes out the incoming U.S. recession, the market hedges its rate cut forecasts...

@LizAnnSonders: Investors still pricing in rate cuts by end of this year, but have eased up on magnitude when comparing to expectations on day of April jobs report (May 5)

The 100th trading day of 2023 hits this week...

In the past, a market up 8%+ on its 100th day has boded well for future returns. A double-digit gain between now and year end will put some big time strategists into the hot seat.

And if investors begin to feel behind the market and uninvested, they have much cash that they can hit the BUY buttons with...

While the pundits are TV were focused on the debt ceiling drama, the stock market was busy making new highs for 2023. The strength in the credit markets should also be seen as a positive. High Yield spreads continue to remain tight. The Fed speakers continue to tap the “inflation is not over” button causing the markets to consider a June rate hike. However, the markets have moved to pause, hike and then pivot!  The consumer economy remains extremely healthy even as credit trends normalize from the super healthy COVID era stimulus window. Credit cost have moved higher which historically has caused a decline in borrowing and subsequently a slowdown in growth. This scenario runs the risk of causing the economy to slow in the second half of the year. Will the forecasted slowdown sink the markets? We do not think so. The U.S. banking and financial system is too healthy. Banks are well reserved, private buckets of capital are ready to buy assets, corporate balance sheets are in fine shape and investors are sitting on $7 Trillion of cash. Excluding some major geo-political event, the markets should continue on the same upward trajectory.  Will the S&P 500 take out the 2022 high of 4,800 or its October low of 3,600? I think that you know what my answer is.

Bill and I are available to answer any questions you may have about your individual portfolio or planning needs. Please do not hesitate to call.  We would love to hear from you.

I hope everyone has a great summer!

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