Weekly market guide - Butler Financial, LTD
Important Tax FAQs

Resources

Weekly market guide

Review the latest portfolio strategy commentary from Mike Gibbs, managing director of Equity Portfolio and Technical Strategy.

Narrative shift after narrative shift that is the road ahead. Good economic data and better-than-expected inflationary readings in January led to investor talk of a soft-landing (and even “no-landing”) with a resulting surge higher in equities. Of course, this was then followed by hotter inflation readings in February, pumping the brakes on investor enthusiasm over the past month. Expected Federal Reserve (Fed) rate hikes have moved up significantly over this time frame with the market now implying 67% odds of a 50 basis point (bps) hike at the March 22 Federal Open Market Committee (FOMC) meeting (and a total of 5 hikes in 2023 to reach a peak rate of 5.6%).

Due to uncertainty and the stakes being so high on inflation, emotional sentiment swings are likely to continue for the market as investors digest the incoming dataflow. The next measures to watch include the February jobs report on March 10, followed by February CPI on March 14. This incoming data will be important for the Fed, and accordingly will be highly influential on market moves. But just as January optimism was unjustified, the current adjustment may be too far in the other direction. In the coming weeks and months, we expect the shifting narrative to continue – and it is why we believe that equities may trade between a potential 3700-4300 range.

In periods of high uncertainty and volatility, it is easy for long-term investors to lose focus and become increasingly short term thinking. But a lot of these market fluctuations are noise for the long-term investor. In fact, some positives can be gained in the recent move. Following Fed Chairman Jerome Powell’s testimony this week, higher rate expectations coincided with lower inflation expectations – reflecting Powell’s message that the Fed remains committed to bringing inflation lower (and keeping it there). Accordingly, 5- and 10-year inflation expectations pulled back and sit within the Fed’s targeted 2-2.5% range. This is a big deal for long-term potential values, as equities typically trade at their highest valuations when inflation is in that 2-3% “sweet spot.” Just as the Fed is willing to take some short-term pain for long-term gain, we believe that long-term investors should too.

In the short-term, our bias is for some caution ahead of the incoming data. The S&P 500 is near the midpoint of our expected 3700-4300 potential range and breaking below support on March 9, as concerns increase on the economy. Additionally, the 2-year Treasury yield, TIPS yield, and U.S. dollar are trending higher, which have been negative influences on equities over the past year.

In summary: First we need to need to conquer inflation, and then assess how much damage will be inflicted on the economy. Until we get a degree of clarity on inflation, the odds are low that the market is able to trade back to new highs. However, technical characteristics over recent months also indicate that October may have been the bear market lows. This lends itself to a bottoming and recovery process that are likely more elongated this cycle. Expect volatility to persist in the short-term, but don’t lose focus on the long-term. We recommend using the drawdown periods as opportunity to accumulate favored areas within a long-term perspective.

View full PDF


IMPORTANT INVESTOR DISCLOSURES

This material is being provided for informational purposes only. Expressions of opinion are provided as of the date above and subject to change. Any information should not be deemed a recommendation to buy, hold or sell any security. Certain information has been obtained from third-party sources we consider reliable, but we do not guarantee that such information is accurate or complete. This report is not a complete description of the securities, markets, or developments referred to in this material and does not include all available data necessary for making an investment decision. Prior to making an investment decision, please consult with your financial advisor about your individual situation. Investing involves risk and you may incur a profit or loss regardless of strategy selected. There is no guarantee that the statements, opinions or forecasts provided herein will prove to be correct.

Links to third-party websites are being provided for informational purposes only. Raymond James is not affiliated with and does not endorse, authorize, or sponsor any of the listed websites or their respective sponsors. Raymond James is not responsible for the content of any third-party website or the collection or use of information regarding any websites users and/or members.

This report is provided to clients of Raymond James only for your personal, noncommercial use. Except as expressly authorized by Raymond James, you may not copy, reproduce, transmit, sell, display, distribute, publish, broadcast, circulate, modify, disseminate, or commercially exploit the information contained in this report, in printed, electronic, or any other form, in any manner, without the prior express written consent of Raymond James. You also agree not to use the information provided in this report for any unlawful purpose. This report and its contents are the property of Raymond James and are protected by applicable copyright, trade secret, or other intellectual property laws (of the United States and other countries). United States law, 17 U.S.C. Sec. 501 et seq, provides for civil and criminal penalties for copyright infringement. No copyright claimed in incorporated U.S. government works.

Index Definitions

The S&P 500 is an unmanaged index of 500 widely held stocks that is generally considered representative of the U.S. stock market.

The Dow Jones Industrial Average (DJIA) is a price-weighted average of 30 significant stocks traded on the New York Stock Exchange (NYSE) and the NASDAQ.

The NASDAQ Composite is a stock market index of the common stocks and similar securities listed on the NASDAQ stock market.

The MSCI World All Cap Index captures large, mid, small and micro-cap representation across 23 Developed Markets (DM) countries. With 11,732 constituents, the index is comprehensive, covering approximately 99% of the free float-adjusted market capitalization in each country.

MSCI EAFE (Europe, Australasia, and Far East) is a free float-adjusted market capitalization index that is designed to measure developed market equity performance, excluding the United States & Canada. The EAFE consists of the country indices of 21 developed nations.

MSCI Emerging Markets Index is designed to measure equity market performance in 23 emerging market countries. The index’s three largest industries are materials, energy, and banks.

Keep in mind that individuals cannot invest directly in any index, and index performance does not include transaction costs or other fees, which will affect actual investment performance. Individual investor’s results will vary. Past performance does not guarantee future results. Future investment performance cannot be guaranteed, investment yields will fluctuate with market conditions.

International Disclosures

For clients in the United Kingdom:

For clients of Raymond James Financial International Limited (RJFI): This document and any investment to which this document relates is intended for the sole use of the persons to whom it is addressed, being persons who are Eligible Counterparties or Professional Clients as described in the FCA rules or persons described in Articles 19(5) (Investment professionals) or 49(2) (high net worth companies, unincorporated associations, etc.) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (as amended)or any other person to whom this promotion may lawfully be directed. It is not intended to be distributed or passed on, directly or indirectly, to any other class of persons and may not be relied upon by such persons and is, therefore, not  intended for private individuals or those who would be classified as Retail Clients.

For clients of Raymond James Investment Services, Ltd.: This document is for the use of professional investment advisers and managers and is not intended for use by clients.

For clients in France:

This document and any investment to which this document relates is intended for the sole use of the persons to whom it is addressed, being persons who are Eligible Counterparties or Professional Clients as described in “Code Monetaire et Financier” and Reglement General de l’Autorite des marches Financiers. It is not intended to be distributed or passed on, directly or indirectly, to any other class of persons and may not be relied upon by such persons and is, therefore, not intended for private individuals or those who would be classified as Retail Clients.

For clients of Raymond James Euro Equities: Raymond James Euro Equities is authorised and regulated by the Autorite de Controle Prudentiel et de Resolution and the Autorite des Marches Financiers.

For institutional clients in the European Economic rea (EE ) outside of the United Kingdom:

This document (and any attachments or exhibits hereto) is intended only for EEA institutional clients or others to whom it may lawfully be submitted.

For Canadian clients:

This document is not prepared subject to Canadian disclosure requirements, unless a Canadian has contributed to the content of the document. In the case where there is Canadian contribution, the document meets all applicable IIROC disclosure requirements.

Broker Dealer Disclosures

Securities are: NOT Deposits • NOT Insured by FDIC or any other government agency • NOT GUARANTEED by the bank • Subject to risk and may lose value

Raymond James & Associates, Inc., member New York Stock Exchange/SIPC. Raymond James Financial Services, Inc., member FINRA/SIPC. Raymond James® is a registered trademark of Raymond James Financial, Inc.


Other posts you might like
ButlerFinancial
Navigating Medicare decisions in tricky situations

Retirement & Longevity What encore careers, young dependents and early retirement mean for your...

read more
ButlerFinancial
7 money moves to help enhance your cash

Retirement & Longevity Sometimes savings can be easier to find if you know where to look. Beyond the...

read more
ButlerFinancial
Don’t let a natural disaster derail your business

Business Ownership Protect what you built with the right policy and a contingency plan. From tornados and...

read more