After Powell’s remarks this week, we expect the Fed to be more data dependent and more forward looking. All other things being equal, this should reduce the chances of the Fed “over-tightening.” But given the Fed’s forecasting record, we remain uncertain.
We believe that this week’s trading and movements in financial markets confirms that interest rates and their volatility continue to be the principal drivers of equities and currencies. The importance of downwardly revised earnings and margins that we have been anticipating have been prominently on display this week as well. The muted spillover effects from negative “surprises” from even some of the largest MegacapTech stocks has been an encouraging sign for the overall U.S. equity markets. Everything else being equal, seasonal factors could be very conducive for favorable U.S. stock performance in the near term.
Our general investment approach remains the same as depicted in last week’s commentary. We maintain our preference for big cap high quality stocks with good balance sheets, relatively stable cash flows and stable margins. Volatility across sectors continues to be supportive of a diversified portfolio for long term investors.
We assume continued volatility across virtually all financial markets. We maintain our belief that selective stock picking will continue to play a critical role in outperformance. Seasonal factors could also affect financial markets’ behaviors. We anticipate that downward revisions ibn Q3 results could further pressure equities.
Our general investment approach remains the same as depicted in last week’s commentary. We maintain our preference for big cap high quality stocks with good balance sheets, relatively stable cash flows and stable margins. Volatility across sectors continues to be supportive of a well-diversified portfolio for long term investors. On a selective basis, we remain favorably disposed towards energy, health care, financials and growth stocks – including selected high quality tech stocks.
. We understand that the Fed’s latest planned trajectory of hikes in the federal funds rate has increased the probability of a U.S. recession by sometime next year. It has also lowered the risk/reward calculus for the purchase of equities. As we have advocated this entire year, we would only buy selected securities on market downturns. We maintain our belief that selective stock picking will continue to play a critical role in outperformance.
We are not at all surprised by the extreme volatility in financial markets post the Fed meeting this week. The Fed’s new approach has lowered the risk/reward calculus for equity levels. Long-term investors should be prepared to live through a period of increased volatility. Advantageous buying opportunities will continue to appear on a selective basis. Prudent stock picking should lead to outperformance over time. Patience will be important in seeking to achieve positive returns.
Our general investment approach remains the same as depicted in last week’s commentary. We maintain our preference for big cap high quality stocks with good balance sheets, relatively stable cash flows and stable margins. Continued volatility among sectors this week is supportive of a well-diversified portfolio for long-term investors.
Our general investment approach remains the same as depicted in last week’s commentary. We maintain our preference for big cap high quality stocks with good balance sheets, relatively stable cash flows and stable margins.
We continue to foresee financial market volatility and we maintain our conviction that equities should only be purchased on market downturns. We surmise that selective stock picking will continue to play a critical role in outperformance. We accept that low liquidity and one-sided positioning will continue to play a significant role in financial markets as these factors probably will exacerbate market volatility. Seasonal factors may also play a role in market volatility. Historically, September is the worst performing month of the year in this century. September and October typically also have high levels of volatility. But the good news is that U.S. mid-term election years have a strong finish and that typically Q4’s are the strongest quarters of the year.