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Q3 2023 - Another Shutdown? Just Stop!
We’re through three quarters of 2023 and thus far we’ve had a pretty strong stock market rebound from the debacle of 2022. After this rebound stalled in Q3, I do think that we’ll see another rally in Q4 and to close out the year. Is that guaranteed? Absolutely not. But there are bull and bear cases to be made and I’m more inclined to believe the bull case.
First the bear case. Virtually everyone agrees that the U.S. and global economies are slowing down. The question is, to what degree? Inflation remains elevated and is nowhere near the Fed’s 2% target. The effects of Fed rate hikes have yet to be fully felt in the economy. Bank lending remains tight and is likely to present a significant drag on future growth. Finally, geopolitical pressures could re-assert and we have one of strangest presidential races in our history forthcoming (most of each party doesn’t like the presumptive choice). The theory holds that deteriorating economic conditions will be bad for stocks because financial markets are currently pricing in a soft landing – when have you ever seen the Fed get it right? We’ve also got our usual ineptitude in Washington leading us and are heading for another government shutdown battle. It’s doubtful that we’ll get a shutdown, but luckily shutdowns usually don’t affect the stock market.
The bull case for why things will be different this time and we’ll achieve a soft landing without recession: The Covid pandemic and related government fiscal and monetary responses caused major disruptions in the economic data. For example, money supply growth, manufacturing activity, home sales and the availability of credit all rose sharply coming out of the pandemic, only to be followed now by significant downtrends in those same indicators. Bears are taking the pessimistic view and only acknowledging the poor data and worsening conditions which appear to be as bad or worse as conditions typically preceding past recessions. People are so focused on the bad news that they aren’t realizing that the data is merely bringing us back to normal trendline growth prior to the pandemic. The negative indicators may be overstating the bear case and that we are in the process of climbing the proverbial wall of worry towards another bull market. Inflation is the wild card, but there are green shoots out there. Take AI and its potential – Yes, it’s a buzz, but will it be the next pets.com or truly transformative. I do know that companies are talking about ad nauseum. We went from ~500 mentions of AI on earnings calls in 2015 to ~30,000 this year and I’m seeing an uptick in AI solutions everywhere I look (just used Spotify yesterday and they have an AI DJ curating a playlist for me).
Will it be a bull or a bear? Time will tell, but the most important thing is to stay invested and make asset allocation shifts as necessary.
Due to the crazy amounts of rain we received this past winter (hopefully it continues and we’ll have another epic ski season!) taxes in California for 2022 aren’t due until October 16th. Make sure you’ve made your retirement contributions and have your returns filed by the 16th. As we look ahead towards the holidays and family, now also makes a great time to revisit wills and trusts to ensure everything remains as you originally planned.
Youth sports are big business. Personally, I think these numbers are low based on my experience, but it’s still crazy. Parents spend between $30 and $40 billion per year on youth sports according to the Aspen Institute. In 2022, the average cost for one child’s primary sport per season was $883, according to a survey by Project Play. That adds up to $8,000 per year for a family with three children each playing a primary sport in the fall, winter and spring. (Source: Aspen Institute)
Speaking of sports, it must be tough play 17,000 games and only have one win! Yahoo, once the most used site on the internet is making a comeback. Scientists are looking for ET by analyzing atmospheric conditions on other planets, but some say they are going about it in the wrong way. Are electric cars causing blackouts? It sure seems that way with the joke of an electric grid in our area.
Enjoy the fall!