Market Insight May 22, 2023

Our weekly market insight provides timely and accurate information on the financial landscape. We deliver tailored insights on different aspects of the market, economic indicators, and our investment strategy.

Bonds Are Not Buying It  

What is it?

“The market rallied on the story that the debt ceiling impasse will be solved ahead of X Day on June 1st.”*

However, it seems like there is a disconnect between the optimism in equities. The bond market has not reacted the same way. 

“Interestingly, through this whole debt ceiling debacle, volatility has barely budged despite some legitimate concerns the U.S. could technically default. So, either equity risk (as measured by volatility) is missing something, or it has nailed that things will eventually get resolved.”*

Why does it matter?

While the equity markets could be right, they may be too focused on the debt ceiling relief as opposed to what comes after that. There could be less liquidity in the markets even if the debt ceiling is resolved which may bring equities down more than some estimates are pricing in. If investors were more confident, then markets would be noticeably higher as opposed to moving up for one day just to remain there or fall back down the next day. 

The Market is Slightly Optimistic

What is it?

With equities inching higher, some investors expect the Fed to cut interest rates within a year. However, as of now the Fed says they plan on keeping rates higher for longer. 

Why does it matter?

While the market has maintained its value in recent weeks, price action has not shown much conviction to make a move higher. There has not been a definitive move higher or lower in terms of the broader stock market. The recent consolidation may be from investors not wanting to make definitive investments to either buy in or sell out of the market. 

The market is only really buying into the top tech names while almost everything else is suffering year to date. There is not much optimism outside of the largest stocks that have been weathering the storm of higher interest rates. We are maintaining a risk off approach in our tactical portfolios while participating in certain investments as we see fit. 

Other articles we found interesting this week:

Bitcoin-Ether Correlation Weakest Since 2021, Hints at Regime Change in Crypto Market

Japan’s stock market is smoking the S&P 500. Is it too late to jump in?

Struggling Chains That May Not Make It to 2024

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.

Click here for more details about our investment management 

Sources:

*Keith McCullough. “Early Look – Toiling For Wealth”. 5/18/2023. Hedgeye Risk Management. https://app.hedgeye.com/

IMPORTANT DISCLOSURES: 

Educational use Only. The market update published by Breakaway Financial Group LLC (“Breakaway”) is intended to be educational in nature and is not intended to be a recommendation for any specific investment product, strategy, plan feature or other purposes. Accordingly, it should not be construed by any consumer and/or prospective client as solicitation to effect, or attempt to effect transactions in securities, or the rendering of personalized investment advice for compensation. 

Advertising and Marketing. Communications such as this are not impartial and are provided in connection with advertising and marketing. This material is not suggesting a specific course of action or any action at all. Prior to making any investment or financial decisions, an investor should seek individualized advice from a personal financial, insurance, legal or tax professional that takes into account all of the particular facts and circumstances of an investor’s own situation. No person associated with Breakaway is a licensed attorney or tax professional and the information contained herein should not be considered tax or legal advice. 

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Craig Stahlecker

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IMPORTANT DISCLOSURES:
The information provided is intended to be educational in nature and is not intended to be a recommendation for any specific business or tax strategy, plan feature or other purposes. Accordingly, it should not be construed by any consumer and/or prospective client as solicitation of services.

Communications such as this are not impartial and are provided in connection with advertising and marketing. This material is not suggesting a specific course of action or any action at all. Prior to making any business or tax planning decisions, an individual should seek individualized advice from a personal financial, tax, legal, or business consultant professional that takes into account all of the particular facts and circumstances of an individual’s own situation. No person associated with Breakaway Financial Group LLC is a licensed attorney, and the information contained herein should not be considered legal advice.