June 20, 2023 •Nathan Willis
Key Events: The Pause that refreshes
The Fed paused its rate hike campaign, indicating that two more rate hikes are likely in 2023.
Secretary of State Antony Blinken traveled to China, a trip that was postponed by the alleged spy balloon incident in February. While expectations were low, Mr. Blinken sought to improve communications and avoid miscalculations.
Market Review: The bulls continue to run
Technology drove returns again; the sector was up over 4% for the week and 40% YTD, driving the S&P 500 to 2.6% returns for the week and 15.8% YTD. All stock groups - except small caps - came along for the ride.
Bond returns were positive as the Fed paused its rate hikes.
Outlook: what will stop the momentum?
Last week we discussed the fact that the market has lost some confidence in the Fed. The chart below shows why; the fed did not react to inflation quick enough and was forced to embark on the most severe rate hiking cycle in its history.
Now that they have paused their rate hikes the focus turns from the fight to tame inflation to the risk of recession caused by those hikes. Leading indicators suggest that recession risk is high and valuations – particularly in the large cap space – do not provide a significant margin of safety for the investor.
Therefore, OneAscent portfolios remain broadly diversified, invested across the spectrum of markets and investing styles.
Speed of Federal Reserve interest rate hikes[1]
Navigator Outlook: June 2023
This material is intended to be educational in nature,[2] and not as a recommendation of any particular strategy, approach, product or concept for any particular advisor or client. These materials are not intended as any form of substitute for individualized investment advice. The discussion is general in nature, and therefore not intended to recommend or endorse any asset class, security, or technical aspect of any security for the purpose of allowing a reader to use the approach on their own. Before participating in any investment program or making any investment, clients as well as all other readers are encouraged to consult with their own professional advisers, including investment advisers and tax advisors. OneAscent can assist in determining a suitable investment approach for a given individual, which may or may not closely resemble the strategies outlined herein.
[1] Source: Visual Capitalist Interest Rate Hikes: Comparing Their Speed from 1988-2023 (visualcapitalist.com)
[2] Market Returns reference the following indices: Large Cap – S&P 500, Mid Cap Growth – Russell Midcap growth, Mid Cap Value – Russell Midcap Value, Small Cap – Russell 2000, Developed – MSCI EAFE, Emerging – MSCI Emerging Markets, Aggretate – Bloomberg US Aggregate, High Yield – Bloomberg High Yield
OAI00307