June 1, 2023
By Peter Bower
Early this year, the Bull wrote that investors were not likely to see a recession or boom this year. A messy year with some sectors doing well while others did poorly and some switching back and forth is what was most likely. For example, the energy industry started the year with vigor and recently collapsed. The Bull would not be surprised if it strengthens again before this year is over. Technology companies have done the opposite: weak to begin with and now in favor.
Inflation is coming down, but not in a straight line and sometimes grudgingly. The Federal Reserve seems, at times, to be just as indecisive and confused as the rest of us. However, there is progress in bringing down inflation. In fact, we are probably close if not at the end of the Fed’s tightening cycle. For investors this is good news, but not universally so. A confusing environment is likely to persist.
As the Bull and his partners have recently stated, our stock market’s returns this year have all come from just 10 stocks. The big question is, “does this change and how?” Yes, it will change, but does the market broaden or does this bubble burst and cause a general correction? That question may be answered by the Fed. If they do not raise rates again in June, then investors could very well celebrate and delve into more and more sectors seeking opportunity. If they do raise rates, then the narrow market continues, but gets unsustainable and soon crashes.
This is all near-term action. Long-term investors should fade their concerns and seek to take advantage of whatever direction the market heads. At the very least, do not chase the tech, artificial intelligence bubble. In fact, if you have been lucky enough to have some stocks that have benefited from this mania, take some profits. In the meantime, we will muddle through. Stay steady my friends.
The Lonely Bull
