Investors Have High Hopes
What is it?
The markets have been holding up lately despite any daunting headlines. Some investors are hoping that the Fed can engineer a soft landing by bringing inflation closer to 2% year over year. Whether that happens or not, we will be adjusting our investments as conditions change. We are seeing a minor pullback to lower prices as some assets were signaling overbought in the last two weeks.
Why does it matter?
At the end of the day, the markets have the final say. If news is bad but perceived in a good way it can help markets move higher and vice versa. We use changes in price over time to give us an indication of what is new in the market. It is easy to get misled when just reading articles online. One article can say it’s a good time to buy and another can say it’s a good time to sell even when referring to the same news or data point. Because of this, we realize it is best to stick to our process and see how changes in price actually occur, not what the projections are. Whether prices move higher or lower, we aim to look through the noise of the markets and base our decisions on what really matters such as the macroeconomic environment and recent price movements.
Fed Expectations Evolve
What is it?
“Goldman Sachs and Bank of America said they expect the U.S. Federal Reserve to raise interest rates three more times this year, lifting their estimates after data pointed to persistent inflation and a resilient labor market.”*
Both Goldman Sachs and Bank of America “expect a 25 bps (basis points) hike in the Fed’s June meeting, pushing the terminal rate up to a 5.25%-5.5% range.”*
Why does it matter?
Markets have been resilient, but the higher interest rates go the harder it will be on individuals and businesses. While these are just projections, it is important to see how expectations are changing and account for that in terms of investments. With the Fed still on the move to slow down inflation, we are maintaining a risk-off approach with the potential to change at any time.
Other articles we found interesting this week:
S&P 500, Nasdaq slip amid hawkish Fed, sticky inflation signs
Is there room for further US Dollar weakness?
Current 401(k) portfolio
Our last 401(k) portfolio reallocation: 5/19/2022.
Want more information?
The weekly market insight provides a window into the process we use in our investment management process. At Breakaway, we believe markets are always changing and require a nimble yet data-oriented approach.
Our process attempts to identify trends and momentum in the financial markets. With that information, we align our clients’ portfolio accordingly in the hope to help our clients accomplish their life goals while attempting to lower the risk of a large drop in their portfolio.
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Sources:
*Aniruddha Ghosh and Siddarth S. “Goldman Sachs, BofA expect three more Fed hikes this year”. 2/27/2023. https://finance.yahoo.com/news/goldman-sachs-now-expects-three-090631377.html
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