Most experts in the forecasting of stock prices, as in, highly paid ‘strategists,’ ‘economists,’ and ‘investment officers’ of large, multi-national financial institutions started 2023 expecting stock markets to decline or remain stagnant. Many of these experts doubled down on their gloomy predictions as the market defied expectations out of the gate. As I write this newsletter on the last day of the second quarter, the stock market has once again zigged when everyone thought ‘zag’. Expectations have been shattered again – surprise!

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What gives? Why would the market dare defy the forecasting abilities of our venerated investment banks and economists, all of whom also would prefer that the market goes up? It’s never entirely clear what drives stock market action, but, in the past low interest rates were at least partially responsible. Stock prices reflected risk premiums accounting for additional leverage that a private equity owner could achieve in a buyout. Hedge funds had the luxury of ‘positive carry.’ This is the enviable position of buying assets (stocks, bonds, others) with high expected returns by borrowing money at rates lower than those expected returns. These trades can even work with relatively safe assets like bonds. However, interest rates are much higher than a year ago, so this may not be the tree to bark up.

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Perhaps the economic data coming from various reporting sources – employment and inflation - are looking better than expected, and this is what is driving the market higher. Many months after the Fed raised interest rates, the U.S. economy has maintained a strong footing and inflation has come down substantially. A burning question is whether these numbers will be sustained or if a ‘hard landing’ is in store for the economy and the markets. One thing is certain – stock prices will move around.  

Avid readers of this newsletter know that we often recommend rolling with the punches when stock markets decline and stay invested for the long run. Long-term planning considerations go into the decision to own stocks as an allocation because, historically, stocks have provided the best returns (long-term) and an inflation hedge. Even retirees should have exposure to stocks – just a more moderate amount. The good news too, is that conservative options like bonds are looking increasingly attractive as potential returns are compelling for the first time in years. Lionshead remains focused on delivering results that fit within your specific investment parameters. Every client has a different plan, a different outlook, a different ‘spend,’ and a different amount of money. Our purpose is to consider all that is part of your unique equation and ensure your plans remain on track.

Another purpose of ours is to help you better grasp the whole equation of your financial life. People often have anxiety over finances when they don’t need to. Changes like higher interest rates may appear detrimental to your financial well-being, but they may even be counterintuitively helpful. Other examples abound, too. If you want to be sure that you’re heading where you want to be financially, please reach out to review your situation with us. In the meantime, we wish you an enjoyable summer!

 

 

Regards,

Scott Lasky, CFP™

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All statements are opinions and should not be construed as facts. This newsletter is for informational purposes only and should not be deemed as a solicitation to invest, or increase investments in Lionshead Wealth Management products or affiliated products. Information provided is for educational purposes. Your advisor does not provide tax, legal, or accounting advice. In considering this material, you should discuss your individual circumstances with professionals in those areas before making any decisions. Further, your advisor makes no warranties with regard to such information or a result obtained by its use, and disclaims any liability arising out of your use of, or any tax position taken in reliance on, such information. Lionshead Wealth Management, LLC is an investment adviser in New York. Lionshead Wealth Management, LLC is registered with the Securities and Exchange Commission (SEC).  Registration of an investment adviser does not imply any specific level of skill or training and does not constitute an endorsement of the firm by the Commission.  Lionshead Wealth Management only transacts business in states in which it is properly registered or is excluded or exempted from registration.  A copy of Lionshead Wealth Management 's current written disclosure brochure filed with the SEC which discusses among other things, Lionshead Wealth Management's business practices, services and fees, is available through the SEC's website at: www.adviserinfo.sec.gov. Past performance is not an indication of future results. Please note, the information provided in this document is for informational purposes only and investors should determine for themselves whether a particular service or product is suitable for their investment needs. Please refer to the disclosure and offering documents for further information concerning specific products or services. Nothing provided in this document constitutes tax advice. Individuals should seek the advice of their own tax advisor for specific information regarding tax consequences of investments. Investments in securities entail risk and are not suitable for all investors. This is not a recommendation nor an offer to sell (or solicitation of an offer to buy) securities in the United States or in any other jurisdiction. This document may contain forward-looking statements relating to the objectives, opportunities, and the future performance of the U.S. market generally. Forward-looking statements may be identified by the use of such words as; “believe,” “expect,” “anticipate,” “should,” “planned,” “estimated,” “potential” and other similar terms. Examples of forward-looking statements include, but are not limited to, estimates with respect to financial condition, results of operations, and success or lack of success of any particular investment strategy. All are subject to various factors, including, but not limited to general and local economic conditions, changing levels of competition within certain industries and markets, changes in interest rates, changes in legislation or regulation, and other economic, competitive, governmental, regulatory and technological factors affecting a portfolio's operations that could cause actual results to differ materially from projected results. Such statements are forward-looking in nature and involve a number of known and unknown risks, uncertainties and other factors, and accordingly, actual results may differ materially from those reflected or contemplated in such forward-looking statements. Prospective investors are cautioned not to place undue reliance on any forward-looking statements or examples. None of Lionshead Wealth Management or any of its affiliates or principals nor any other individual or entity assumes any obligation to update any forward-looking statements as a result of new information, subsequent events or any other circumstances. All statements made herein speak only as of the date that they were made.

 All statements are opinions and should not be construed as facts. This newsletter is for informational purposes only and should not be deemed as a solicitation to invest, or increase investments in Lionshead Wealth Management products or affiliated products. Information provided is for educational purposes. Your advisor does not provide tax, legal, or accounting advice. In considering this material, you should discuss your individual circumstances with professionals in those areas before making any decisions. Further, your advisor makes no warranties with regard to such information or a result obtained by its use, and disclaims any liability arising out of your use of, or any tax position taken in reliance on, such information.S&P 500® Index: is an unmanaged index of 500 common stocks primarily traded on the New York Stock Exchange, weighted by market capitalization. Index performance includes the reinvestment of dividends and capital gains.