As we close in on the mid-term elections, the investment committee has been meeting and discussing our models and overall investment strategies. If you recall last month, we sent out an update mentioning these same points and some key support levels that we were watching. The markets continue to hover around those same levels and the market has been trading range bound between these same levels for the better part of the last month. Heading into the end of the year, a lot of what will play out is dependent upon inflation coming down and whether or not the federal reserve continues to keep its foot on the gas. If we start to see inflation come down, we do think the federal reserve will pivot and soften their stance – which would be welcomed news for the markets and investors. With so much dependent upon just a few variables and with the pending elections, we do think it is prudent to make a few small tweaks to the strategies:
- With the strong US dollar we believe strong headwinds will continue for international stocks. With this in focus, we believe a decrease in exposure to international stocks is warranted. We believe focus should be on domestic blue-chip companies in order to participate in any potential upside.
- Although we do feel most of the volatility is behind us in fixed income, until the federal reserve stops raising interest rates, some volatility will persist. Given that short term bonds are less sensitive to interest rate changes than long term bonds, the current focus should be on shorter durations, that will provide more stability to the fixed income space while finally getting a decent yield.
As always, we are not market timers. However, we are always looking for ways to better position our client portfolios given economic conditions. Market volatility happens both to the upside and the downside. That is why it is important to stay disciplined and not try to time the market. Even missing just one or two days has a huge impact on your overall return. We don’t know when markets will turn but for those who will continue to remain disciplined now will be rewarded in the coming months and years. We are here for you if you have questions or concerns – do not hesitate to reach out to us.