This Week's "Noise"
The January Barometer: “As a baseline, in any given year the market is positive 66% of the time. Whenever January is negative, the market is negative for the year 56% of the time. Whenever January is positive, the market is positive for the year 79% of the time.” (Gibbs Capital Management, 02/06/24).
In other words, this technical indicator implies that January may serve as a gauge for the rest of the year. So how did this January pan out? The S&P 500 was up 1.6%.
Current Outlook (6 to 12 months)
Market
We still see stocks higher at year end. A modest return of 5 to 10% is expected, but we might have an upside surprise.
Economic
US GDP surprised the market with 3.1% gain vs. an expected 2.1%; “productivity has been booming recently. Output per hour in the non-farm business sector rose by 2.7% year-over-year in the fourth quarter, far above its average of 1.2% in the decade before the pandemic.” (Dr. Kelly, JPMorgan Asset Management)
Long-Term View (4 to 7 years)
Long term we believe the US economy will continue to outperform other world economies. This is supported by combination of re-shoring manufacturing, new investments resulting from the Inflation Reduction Act, US energy independence, and higher productivity due to the implementation of Artificial Intelligence (AI) software/systems.
We started 2023 predicting the broad stock market would return to the old highs in one to two years. It took only one year. We believe the US stock market should be 40% to 60% higher by the end of 2028.
Bonds have re-emerged as an important part of asset allocation as yields have risen. We expect a diversified bond portfolio to produce returns 3% to 5% above inflation for the next 5 to 7 years.
“I put two children through Harvard by trading options. Unfortunately, they were my broker’s children.” - Jason Zweig, The Devil’s Financial Dictionary
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The information contained in this report does not purport to be a complete description of the securities, markets, or developments referred to in this material. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete.
Any opinions are those of John O’Hare III and not necessarily those of Steward Partners. Expressions of opinion are as of this date and are subject to change without notice. There is no guarantee that these statements, opinions, or forecasts provided herein will prove to be correct. Investing involves risk and you may incur a profit or loss regardless of strategy selected.
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.
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 NASDAQ composite is an unmanaged index of securities traded on the NASDAQ system.
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