October 2023 Investing Insights
“In a time of deceit telling the truth is a revolutionary act.” - George Orwell
This quote from George Orwell resonates powerfully in the current historical context. Personally, I've found myself repeatedly called upon to stand firmly for what I believe to be right, even in the face of a prevailing narrative that encourages conformity, or else!
In my various roles, people often seek my guidance on influencing market trends. Recently, an article of mine was rejected, seemingly because it spoke uncomfortable truths about policies that I believe do not serve people's best interests, particularly in my capacity as a financial advisor dedicated to helping individuals grow their wealth and achieve their goals. The point is, things won’t improve unless the majority begins to connect policy with outcomes, opting to change course, instead of maintaining the status quo.
As we observed market declines in September and over the quarter, it becomes evident that policy decisions significantly impact market performance. In September, the S&P 500 fell by 4.9%, the Dow by 3.5%, and the Nasdaq Composite by 5.8%. For the third quarter, the S&P 500 was down 3.65%, the Dow down 2.6%, and the Nasdaq Composite down 4.1%.
I remember Dr. Kelly, Chief Global Strategist at JP Morgan Chase, confidently asserting in September 2021 that inflation was "transitory." That was the last time I attended one of his presentations, given that JP Morgan Chase's investment strategies for their clients are predicated on such wisdom. Throughout this period, I have maintained, along with others, that this is not the time for passive indexed investing, but rather for active selection. This sentiment is echoed even by my colleagues at my former firm, Morgan Stanley - thank you Mike Wilson!
"Higher for longer" is the reality we must confront. The Fed is resolute in targeting a 2% inflation rate; however, the September PCE, excluding food and energy, came in at 3.9% – a figure too high for the Fed's comfort. The prevailing sentiment suggests another rate hike, and as we head into 2024, we may only see a half percentage point reduction. These are not comforting words for most.
There is undeniable evidence that inflation is not merely persistent, but deeply entrenched. For consumers, this means making careful choices about how funds are allocated based on their priorities. Despite rising costs, people continue to express a desire to travel, albeit more domestically. However, they are approaching larger purchases and discretionary spending with greater thoughtfulness. Investment opportunities lie in a combination of offensive and defensive strategies, with energy and industrials once again emerging as robust options.
For Q4, this translates to deliberate investment decisions aimed at achieving a balanced approach, all while keeping an eye on 2024. I would like to say that smooth sailing lies ahead, but with an election year on the horizon, hyper valuations, and the current state of leverage, opportunities for strategic repositioning are likely to abound. The ability to act swiftly remains paramount.
I extend my warmest wishes to you all for a fruitful October. The winds of change continue to blow, bringing with them some disruption, even amidst the breathtaking display of fall colors.
Warm regards,
Lisa Durant
