How will investment markets close out the year?
Running Point and its chief investment officer, Michael Ashley Schulman, CFA, were quoted by the International Business Times in an article — by Panos Mourdoukoutas, “Stocks And Bonds Surge As The Tone Changes On Wall Street – Will The Rally Last?” — regarding global-macro commentary and current investment market outlook.
Could be a good year-end for stocks
The stock market could be setting up for a nice run into end of year; 3rd quarter earning and margins have been positive, a lot of tax harvesting has already been taken place with the September/October downturn, yet Wednesday and Thursday of last week saw the largest two day stock market gain of the year.
The war effect
Geopolitical macro economic events are tragic and extremely concerning, but the broad investment market may look beyond the current turmoil as long as it doesn’t physically escalate and cross borders into more nations.
Is the Fed done raising interest rates?
The Federal Reserve, led by Chairman Jerome Powell, may be done with rate raises although quantitative tightening (QT) is continuing as the Fed continue to sell mortgages and Treasuries and reduce their balance sheet. As long as employment remains strong, job openings are high, and consumers keep spending, recession scenarios should be delayed or might not even comes to pass. To get a recession, you really need a financial aspect to pop and credit to dry up—so far that has not happened.
Additionally, generative artificial intelligence (AI) is a game changer, creating a seminal transition over the next 3 to 10 years to shift productivity higher on the S-curve and maintain and defend corporate margins.
The stalwart U.S. consumer
The U.S. consumer has fought inflation with leverage and borrowing, but delinquency is still below long term averages and consumers will probably try not to be as vulnerable as they were during the great financial crisis of 2008 and 2009.
Next steps: Private investments
Going forward, we may be looking at lower growth, high interest rates for longer, high margins that probably won’t expand much from here, possible falling asset valuations, and episodic volatility creating an idiosyncratic market where many companies won’t be able to withstand the higher cost of capital. To exploit this idiosyncratic setup, alternative and private investments may provide more palatable opportunities for some investors than the public markets.
Quoted article excerpt is below:
Michael Ashley Schulman, CFA, partner and chief investment officer at Running Point Capital Advisors, isn’t optimistic about equities. He thinks slow economic growth and high interest rates for longer will put pressure on earnings margins and valuations, creating an idiosyncratic market. “Many companies won’t be able to withstand the higher cost of capital,” he said. “To exploit this idiosyncratic setup, alternative and private investments may provide more palatable opportunities for some investors than the public markets.”
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