Dear Friends,

The first half of the year is in the books. Let’s take a closer look at the market and our strategies as we move forward.

Seizing Opportunities: Increasing Risk and Exposure & Recognizing the Potential

I spent the majority of the 4th quarter of last year preaching that the market pullback was creating opportunity and that it was time to increase risk. Increasing risk is a relative term. If you own a mix of stocks and bonds, it would mean to increase exposure to stocks. If you primarily own stocks, it would mean to own more aggressive, growth-oriented stocks.

Reallocating in Turmoil: Capturing Tax Losses for Future Gains & Smarter Strategy in Challenging Times

In times of market turmoil, most people default to two different modes: sell or take the ostrich head in the sand approach, by not looking and doing nothing. We maintain that the smarter strategy is to reallocate. Turmoil allows investors to potentially capture tax losses and reinvest the proceeds into similar or even more aggressive positions which can ultimately provide for larger returns when the market recovery eventually takes place.

The Recovery Unveiled: Paying Off in a Big Way

Nevertheless, the recovery is most definitely under way. And more importantly, the moves that we made last year, and continue to make this year are paying off in a big way.

The Power of Historical Data

My confidence in that last year’s drop should be bought rather than sold stemmed from my belief that the primary headwind for the market was higher interest rates. Higher rates were a result of higher inflation, and inflation had shown clear signs of topping out in June 2022, which would ultimately allow the Fed to stop raising rates in 2024. Understanding that the market always looks ahead (6 – 12 months imo), getting more aggressive in Q4 of 2022 made sense.

The Rhyme of History

That belief was strengthened by an onslaught of historical data that supported my bullish view. I remain a believer that analyzing history is the greatest way to predict market returns. The saying “History doesn’t always repeat itself, but it often rhymes” remains remarkably accurate in financial markets. I believe this is due to human nature as it relates to fear and greed.

Looking Ahead: The Million Dollar Question

So where are we now? What’s in store for the second half of the year? That’s the million-dollar question.

Tech-Driven Momentum: Unveiling the Catalyst

The majority of the move in the market this year has been from a handful of large tech companies. As evidenced by the NASDAQ recording a year-to-date gain, while the equal weight S&P 500 is up on the year. Some argue that this is a sign of an unhealthy market, that is only being propped up by a handful of companies and is again due for a pullback.

The Catalyst

I, however, think we are in the early stages of another multi-year bull market. I would liken this to the mid-90s when the internet changed the way the world operated and led the US stock market to all-time highs.

What is the catalyst? Artificial Intelligence. It’s not a secret. It’s spoken about daily on all the major news networks and on social media ad nauseam. But it’s real, and we are in the very early stages.

Historical Patterns: Favoring the Bulls

And finally, history is again on the side of the bulls. Since 1954, there have been nine times prior to this year that the market gained > 10% after being down the year before. The market finished the back half of the year up eight out of those nine times for an average return of 11.8%.

A Grateful Note: Thank You and Let’s Connect

If you are a client, we thank you for your business! If you aren’t yet a client, let’s have a conversation to see if we should work together.

I hope everyone is enjoying their summer!

Thank you for your continued trust and support.

Sincerely,
JC