September Market Preview: Exploring our Demand-Driven EconomyInvesting Insights
Our economy is driven by demand. Demand is driven by people, and people make markets. This is a core belief in how we build, manage, and monitor our portfolios. So, as we look forward to September and the rest of this year, we’re exploring some essential mindsets that can be beneficial to keep in mind, recent market events, and how to react to them.
There's a big difference between investing in the stock market and investing in companies through the stock market.It can be tempting to try predicting what the stock market will do tomorrow. Instead, investors need to focus on dividends as the key to long-term investment success. When you get trapped in share price movement speculation, you’re more likely to experience whiplash in the process. Investors can use the stock market to create a steady stream of cash dividends coming from a portfolio of stable and profitable enterprises.
In your lifetime, you’ve seen the markets swing from bubble to scandal and back again. You may have wished there was a strategic approach to investing that strengthened portfolios, benefited companies, and bolstered the economy as well. The answer, here again, is you need to focus on dividends.
Volatility on the Rise
As the summer slowdown comes to a close, we prepare for an uptick in volatility and want to make sure our portfolios are still in line to meet your goals. So our team at Anew Advisors wanted to provide an update on our current thoughts on the market.
Let’s start with unemployment. The demand for jobs in the economy is increasing. As a result, wages are rising, and employment has dropped back within a normal range. Moreover, with the end of additional unemployment benefits coming in October, we will likely see unemployment continue to decline.
But what about inflation and interest rates? Yes, both have been on the rise, and as wages rise, we could see it stick around for a little longer than the “transitory” period that The Federal Reserve likes to talk about. But perspective is also essential. As short ago as 2018, the fed funds rate was over 2.5%. Currently, it’s 0.25%. So even with quarterly upward adjustments, it will take a substantial amount of time to reach numbers from even three years ago.
Price-to-earnings ratios are a common way to evaluate stocks. Pundits would like you to believe that these price-to-earnings ratios are getting too high, which can indicate a sell-off of stocks. Pundits want to create fear because fear sells views. What they cover less is that although stock prices are high, earnings are catching up. So far, with 90% of companies reporting earnings for Q2, 85% of them have beat their estimates.
“Sector Rotation.” At this point in the summer, this buzz phrase has flooded every major market news station. What it’s trying to tell you is that people are taking money from one part of the market and moving it to another. Throughout the middle of the year, that money has been moving to value/dividend-paying securities. And while that has been a strong driver for our Income Portfolio, based on the demographics, there are still companies across other sectors that we believe are worth holding. Particularly in tech and healthcare.
The Anew Advisors Way
We have two core portfolios: Income and Technology. And most of our clients blend the two based on their goals. Based on the commentary above, we are currently not making any changes to the blends of those portfolios. If you have concerns about the economy, the market, or any changes to your current goals, reach out to any member of our team to review.