Barring a major unforeseen event, we expect stocks to rally later this year as the corporate earnings and consumer strength picture becomes clearer, and markets “look through” to next year. We discuss some of our reasoning here.
Which parts of the market are best positioned for growth? While impossible to say, there are parts of the investment universe that have long underperformed the tech heavy S&P 500 Indexâ and the NASDAQ. We continue to see the huge disparity built up between U.S. and foreign markets over the past 10-15 years, and between the largest stocks vs. the smallest. These are areas where we look to become more heavily invested (and in the past couple of months we have done just that for our clients). We are already seeing the disparity close, with foreign markets outpacing U.S. markets over the first quarter. Investors in smaller companies will need to look through to next year before they start closing that gap, but the stage is set for this also.
Opportunities arise during periods of fear. While one could sit in cash and let the storm pass, by the time confidence returns the largest gains have already occurred. If you believe that any recession is likely to be shallow and short-lived, as we do, your longest time horizon capital can withstand short-term drawdowns while positioned for greater returns. At Integras Partners, we segment your investments by time horizon, with money you need sooner invested conservatively, and money you don’t need for a long time invested for growth. Our Growth Strategy is positioned to capture the disparities mentioned above.
Fear is always the enemy of good decisions, and it won’t evaporate. But as the year plays out, many current points of concern will fade, and confidence will start to return. As it does, we expect to capture gains that others miss. So, expect mixed signals and more volatility along the way, but recognize that no condition lasts forever, and the longer any condition does last, the closer we are to the end of it. We are close to the end of interest rate hikes. We need to know how deep and long earnings may contract, and that rests with a relatively healthy U.S. consumer. Overall, we may be closer to the end than we realize, and suspect that by the Fall markets will be looking forward and see much sunnier skies than it does today.
Enjoy today and tomorrow, and let us do the worrying!
Contact us to discuss your situation if you’re interested in our time-horizon strategies.
