Samuel Baynes, CRC®
Principal | CEO | CCO
Good Morning Everyone !
This is commentary number two for 2023. Welcome to all the new subscribers and clients.
Few housekeeping items:
First off, I want to welcome and introduce a new advisor to our firm, Christian Stake.
Christian comes to us from New York Life where was successful in assisting clients with their financial objectives. Christian and his family live in the Cincinnati area and will be working out of the Cincinnati office. Christian brings years of experience, a heart for service and fits into our culture well. We are excited to have him as part of the Baynes Investment Counsel family! Welcome Christian.
Second, my apologies for last week’s preview when we sent out the commentary. It didn’t get changed from the end of the year. I noticed it when I receive my own email. Yep, I get it just like you guys do.
Third, tax time is coming up. 1099s will be headed your way soon but not too soon as most of you know. Those are not under our control. Also, you still have time to make those contributions to IRA accounts including ROTH accounts for 2022 if you qualify.
Ok, on to the markets and it has been a pretty good start to the year so far. But…
I don't think that the economic fundamentals right now support a sustained stock rally theory. Yet.
Just because stocks are down does not mean that they will go up as fast as we want.
Earnings are mixed right now and the Fed is NOT done!
Stocks went down Wednesday on earnings reports. Thursday, back up on the GDP report that said the US GDP rose 2.9% in the fourth Q4 2022. This is likely to get revised…down, if I had to guess. Pretty choppy out there right now.
Over exuberance generally does not end well. We are still optimistic for sure, but caution is the word of the day. Or should I say …cautiously optimistic…for the year.
The fact is, as much as I don’t want a recession, I think it’s probably coming. Maybe.
Talk about noncommittal.
Side note: remember we have been saying for months that the slack in the labor market might provide a cushion? I heard that same theory all day yesterday on the financial media. Just sayin”, I thought of it first. HA!
Maybe it will be shallow and short, or maybe we had our “recession”? We are preparing for a recession “like” economy with our portfolios for the next 12 to 18 mo. Hope for the best, plan for the worst.
It feels like there is lots of rear-view mirror gazing going on right now among the public. Everyone wants the stock market to be like it was before. Watch out for that truck in front of you with the brakes on that says, “THE FED”!
Speaking of the Fed. The meeting will wrap up next week and then we shall see what the next Fed rate increase will be. Probably 25 basis points if I'm guessing. The market reaction should be interesting.
Balance, dividends, interest and diversification are important right now and limiting volatility, at least for us when planning for the next 12 to 18 months.
Non correlated investments such as private equity and other nontraditional investments have the potential to smooth out the ride and can provide solid income in a tax advantaged way in concert with the stock and bond markets.
As far as the markets and the economy diverging, I think some questions to ask would be:
Will US GDP hold up? Is the economy actually that bad? Will inflation move down significantly? When will the Fed lower rates? Did we already have the recession? Where will earnings move? Is this the new paradigm?
is there something else going on that is in contrast to the current popular narrative? I think that there might be. More on that in upcoming commentaries. Stay Tuned.
I think that will do it for now until next week.
Have a great weekend! Thank you for your business and all the referrals.
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