By Randal Locklier, President, Gulf Financial
Near-term Outlook (3 months)
It’s 2024, but the market is trading like it’s 2023. The pace of the rally has slowed from last year, but the composition of the rally is similar, as a narrow group of mega-cap Growth stocks propels the market higher. Multiple major stock market indices reached new record highs in late January, but there are risks in the coming months. Seasonality, a tailwind in Q4, is historically a headwind early in presidential election years. Equity market valuations are stretched after the recent market rally, and the market’s aggressive rate cut forecast could cause Treasury yields to move higher in early 2024. There is a lot of optimism priced into the market, and election year uncertainty is likely to come back into play in the coming weeks.
Long-term Outlook (12 months)
The Fed’s tightening cycle is nearing an end, but the economy has not yet felt the impact of higher interest rates. It remains difficult to know when and if the tighter monetary policy’s impact will transmit into the real economy. While we expect economic activity to slow in 2024, the recent loosening of financial conditions and the fixed nature of borrower’s interest rates could continue to delay the recession. In addition, multiple indicators, such as earnings growth and manufacturing PMI, suggest the macro-outlook for 2Q24 and beyond is improving. However, the uniqueness of the current cycle should be considered when evaluating economic data. While we lean bullish over the next 12 months, we think the combination of election year uncertainty and the delayed impact of higher interest rates could make the ride a bit bumpy from here.
Nobody knows for certain which direction the markets will head at any given time. At Gulf Financial we use a sophisticated mix of Financial Instruments to create portfolios that are resistant to market risk. If the markets do move downward, we are prepared. We will not have large drawdowns in client portfolios. It’s in our DNA. That’s the Gulf Financial way! Call Sherri Campell at (833) 403-4041 or visit gulffinancialgroup.com today and schedule your free appointment. Isn’t it time for a second opinion?
