“Off the Wall” Podcast

Q2 Market Recap: Inflation, Jobs, Tech Stocks, & Investing Advice for the Second Half of the Year

Jul 17, 2023 Market & Economic Updates

In this episode of Off the Wall, hosts David Armstrong and Jessica Gibbs are joined by Erin Hay and Nate Tonsager from Monument Wealth Management’s portfolio management team. They dive into a lively and comprehensive discussion on market performance and key highlights of the second quarter of 2023.  

 Tune in to discover their insights on the robust job market, characterized by strong hiring figures and wage growth, the resilience of the market despite negative headlines and the anticipation of higher interest rates, and surprises from the first half of the year, including the absence of a recession and the disconnect between people’s perception of their portfolios and market realities.  

They also explain why historical data suggests we could possibly have a promising second half of the year and discuss the importance of managing expectations.

Enjoy the show!

“People are still getting wage growth. People have jobs and feel comfortable leaving their jobs because they see their prospects in other markets really in a positive light, which is crazy to think about when, as we said at the start of this, the great recession was coming this year… we really haven’t seen that.” – Nate Tonsager, CIPM

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Episode Timeline/ Key Highlights

[02:30] Q2 market performance summary
[04:19] Top 5 contributors to the S&P 500 in Q2.
[05:35] Worst performer in the S&P 500 during Q2.
[06:15] Surprising trends from the first half of the year.
[09:31] What performed well in Q2?
[18:24] The resilience of the market despite negative news.
[20:45] The discrepancy between individuals’ perceptions of their portfolios and market realities.
[23:40] Interpreting the data and actions for investors.
[25:15] Analyzing historical data to project forward returns for the S&P 500.
[27:25] Review your portfolio and adjust based on market conditions.
[30:30] Forecasting the market’s trajectory for the remainder of 2023.

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Transcript

Jessica Gibbs [00:00:33] Hey, everyone, we’re back on off the wall. Hi, Dave.

Dave Armstrong [00:00:36] Hey, great to see you again. Not that I don’t see every day, but you know what I’m saying?

Jessica Gibbs [00:00:39] I know. So we’re back with one of our favorite series. This is our quarterly Market Recap series. We’re going to be talking about Q2 market recap for 2023. We have, as always, our amazing portfolio management team here at Monument, Dave, obviously, and Erin Hay and Nate Tonsager, Erin and Nate. Hey.

Erin Hay [00:00:59] Hey, guys.

Jessica Gibbs [00:01:00] Yeah. So real quick, I just wanted to do a quick shout out to everyone who’s listening really quick. Thank you. Particularly if you’ve taken the time to giving us feedback on our episodes. If you like something or don’t like something, or if you have ideas for future episodes. Sometimes when you’re doing a podcast or social media, you spend a lot of time putting stuff out into the world and you’re never quite sure if it’s resonating with people. So I just wanted to do a quick thank you to everyone who’s been following along, and particularly anyone who’s who’s given us feedback that we really do value it a lot. So thank you.

Dave Armstrong [00:01:33] Yea, Can I pile on there a little bit?

Jessica Gibbs [00:01:35] Yeah, Yeah, go ahead.

Dave Armstrong [00:01:36] And anybody who if I’m just assuming that any listener that’s listening to this podcast listens to other podcast too. So this will sound very familiar, but I know this sounds so hokey, but. If you like this podcast, can you go into your player whether it’s Apple Podcasts and just give it a five star, like write even a sentence or anything? Or in Spotify, you can you can rate it in there as well. It just helps for some, I don’t know how all this magic algorithms and all this stuff works, but that helps stuff, so it helps us. And so if you like it, it’s kind of easy to just take your thumb and mash the five stars and and and do that huge help. Also, here’s another good plug for you, too. Even if you’re not a client and you like what we’re doing here at Monument, jump on over to our website and find the link for a Google review. That would be awesome if any of everybody listening just said like, Hey, love the podcast on the Google Review, because again, that’s just more awareness for us. So maybe some social currency is getting traded here in exchange for our thoughts for a little bit of like, you know, juice on the back end.

Jessica Gibbs [00:02:42] All right. And with that very nice plug, let’s let’s get into the meat of the episode. Dave, I want to start with you. Can you please give us a high level overview of what happened, the markets in Q2 and also first half of 2023?

Dave Armstrong [00:02:55] Right. So so the interesting thing about doing the second quarter review is it also coincides with the first half. So if you’re driving and you want to take notes, pull over because there’s a lot of stuff coming down here. So. All right, let’s just go over some of the major indices here. We have the S&P 500 for the second quarter was up 8.3%. And for the first half of the year, up 15.9% ish, depending on how you around the decimal there. Of note there. If you look at the equal weighted S&P 500 by using the RSP ETF, 3.9% in the second quarter, 5.9% overall for the first half. So a pretty big disparity there that we’re going to talk about this later. But a lot of that has to do with market cap weighting, right. Okay. So 8.3% second quarter, 15.9% first half, I’m going to use that same convention, 3.6 on the Dow for the second quarter, 5.5 for the first half of the year. Nasdaq 12.8 for the second quarter, 13.7 for the first half. The MSCI emerging markets. About eight basis points negative to the negative second quarter, up 3.5% in the first half. So that’s the Emerging markets Economy International and then the Morgan Stanley, the MSCI EFA, which is the more of the bigger developed countries out there for the second quarter, up 1.9% ish, rounding a little bit there. And then for the first half, up 9.7%, which is more of a surprise to me than anything, because that was a pretty decent return, actually way better than than the Dow. Nobody really is talking about that much. Here’s a couple of interesting notes. And I know we’re going to jump into some details later, but the number one contributor. Okay, let’s just do the top five, the top five contributors to the first half of the S&P 500 returns. And then when I say the top five contributors, I am doing a weighted average based on taking the weighting of the stock inside the S&P 500 and multiplying it by the return of that actual security. So this isn’t I’m not talking about returns here. I’m talking about each individual stock’s contribution to that, up 15.9% for the first half. Okay. So Apple was the number one contributor to the S&P 500, its first half returns. With a plus 3%. So the math here is Apple had a total return of 50% ish and it has a market cap weighting inside the S&P of about 6.1%. So that’s how you get the 3% contribution. Second biggest contributor, Microsoft, 2.4% NVIDIA number three, which is interesting because most people would say NVIDIA, but because of its market cap weighting, only a 2.2% contributor, Amazon 1.3 and then Meta or Facebook 1.2. So all tech names are top five contributors. But what was the worst contributor to the S&P 500 was Pfizer. It was it took away 24 basis points of contribution to the S&P 500. It had a 27% total return for the first half, but it only has a market cap weighting of 9/10 of 1%. So that’s why it was so low. So that was the worst contributor. So when you’ve got the best at three in the worst at 24 basis points, you can see like there was a skew there with these big stocks. Couple of interesting first half surprises. This is me, my opinion I love the famous Yogi Berra quote was, you know, something like it’s tough to make predictions, especially about the future. It’s I may have slaughtered that a little bit, but that’s it. And interesting to me that the big like I’m using my air quotes for people who aren’t watching the video here, “the big prediction of a recession”, it didn’t really materialize. It may have felt like it materialized, but technically it didn’t. The stock market was also an interesting surprise because a lot of analysts were predicting a down year. If you go back to the market commentary of let’s just call them the 2023 market outlooks from all the big Wall Street firms. A lot of them were predicting down markets in 2023. Well, here here is the data on the actual, again, down market. Okay. It started on January 4th, 2022. It ran through October 13th of 2022, and that’s when we started to see the recovery. When you go back and look at the chart, that’s when the recovery actually started. So we saw 282 days. That resulted in a decline of 27.5% in the S&P 500. Here’s a couple interesting things about that selloff. So for context, even though we’re talking about the first half, I do need to talk about a little bit about 2022 to set up this conversation. So 2022 sell off. If you look at the sell off. And look at the stocks that contributed to that. Okay. It was Meta was down the most 61%. So that’s from the January to the 10, 13, 22 date, down 61, rounding down 61% in NVIDIA, down 59%. Amazon down 32%, Microsoft down 30%. The S&P 500 was down 23%. Again, it’s not total returns. It’s just the level. And Apple was only down 19.5. So back in October, Right. Everybody was looking at NVIDIA, down 60% and Meta down. And people were really pissed about having those holdings in their portfolio lamenting having this portfolio. Now, you move over to from that October date, October 13th, and you look through the end of the second quarter, you saw NVIDIA up a whopping 254% price return, not even total price return, 254%, Meta up 125%, Microsoft up 42%, Apple up 32%, The S&P 500 up 20% and then Amazon only up 13%. So this is really like the tale of two markets here. And as we start to talk about portfolios and the market review, everybody needs to contextualize a little bit of what we’re talking about versus what you may have experienced in your own portfolios against those two big diverging markets, which basically converted from horrible down market to those stocks through October of 2022 to, hey, if you held on to them, great, you felt good if you sold them. Now you’re lamenting that if he never held them, you feel like your portfolio is not doing well. There could be a lot of emotions here. So with that will kind of turn it turn it back over to how well things performed in the second quarter. So.

Jessica Gibbs [00:09:51] Yeah, yeah. I mean, Erin, I want to I want to pick up on, on that theme of, of what did well so can you talk more about what did well in Q2, you know size style sector etc..

Erin Hay [00:10:01] Yeah. Just going back to what Dave had mentioned a little bit earlier, looking at S&P 500 contributors and we’re looking at Apple. So Apple is getting ready to hit the $3 trillion market cap, which is absolutely absurd. In fact, I think it’s there this morning. Just a stat on that, by the way. So Apple at $3 trillion in market cap is larger than rates, materials, utilities, energy and consumer staples, those entire sectors combined. So just a little bit of additional color on how absurd the some of the concentration that we’re seeing in the S&P 500 said we now have, in addition to Apple, by the way, two names that comprise 7% of the S&P, which I believe I don’t have the stat in front of me, but going back over the last 20 plus years, I think it’s impressive. I think we’ve had two names that combined have accounted for this much of the S&P. So Apple and Microsoft both at 7%. So a lot of concentration there in the S&P, as Dave has pointed out. So, yes, we’re going to look at Q2. What’s what’s been working, of course, has, as David alluded to, the theme of cap weight versus equal weight has continued to assert itself. And much like the first quarter, if you’re looking at a timeline of returns through the quarter, cap weighted equal weight really started off the first quarter kind of in line with each other. In fact, I believe cap, I’m sorry, I believe equal weight actually begun to outperform cap weight. And then we had right around the first week or two of March, we started having those bank failures and that’s when cap weighing just absolutely blew equal weight out of the water. Right. And same sort of theme applied to the second quarter, which we had a pretty close race to begin going through about mid-May or so. And then actually, no, it was for the most most part of the quarter, you had a pretty close race between equal weight and then cap wages took off yet again. So that theme is continuing to chug along. And then it’s just the growth versus value theme as well. So you often hear people talk about style boxes, you know, small cap, large cap value versus growth. We’re continuing to see growth outperform value. And in the second quarter, so growth up close to 14% value, up 4%, they’re both both working to some extent, but relative strength definitely sides over on the growth side of things as well.

Nate Tonsager [00:12:32] Well, that’s kind of you know, it’s almost like boring in Q2, right? It’s like a repeat of Q1 right there. Themes that were there that we talked about before are really the ones that are still persistent. So, you know, kind of another piece, I guess, is more macroeconomic that I really kind of want to highlight outside of stocks. Right. What else really perform well, the job market right here, Dave, you were talking about it. The Great Recession that was coming and going to materialize hasn’t really shown up. And you’ve seen such strength in the job market that when people have income and they have jobs, right, it’s easy to keep an economy moving forward even in a higher interest rate environment. Right. And last week was a big week for job data. You know, you had the ADP report which shows hiring from a private kind of data measure. Huge upside surprise. I think it nearly doubled the consensus consensus estimate. Right. So plenty of people hiring from ADP, which is the big, you know, payroll processing company. They report their hiring numbers. But you also saw some data which shows that the job market isn’t just going straight up to the right. You’re seeing some cooling, which is healthy. Right? We want to see inflation come down and it’s hard to have inflation come down when the economy is so strong and jobs are so strong. So what you saw really is in the government job numbers, it was actually below consensus. And the big number you see there in the nonfarm payrolls is what they call the data series is about 200,000. You know, the rule of thumb is at 200,000. That’s a neutral number. It doesn’t add to unemployment or move from unemployment, but it keeps it about steady state. And we’re right about there. You know, and I think that’s a very kind of important thing that you’re seeing is jobs. People are still getting hired If you are you know, those unemployment numbers are you are, you know, transitioning jobs. A lot of the data in the JOLTS reports are job openings labor turnover. There’s about 1.61 jobs for every unemployed person right now. So if you want a job, it’s out there for you. Now, skills mismatch. We can get into that whole conversation eventually some day. But for now, people have opportunities to work and they are getting kind of pay raises. You know, wage growth is still fairly elevated, and I think that’s the key number to watch in the jobs report going forward. Right. People are still getting wage growth. People have jobs and they’re feeling comfortable leaving their jobs because they see their prospects, you know, in other markets really kind of in a positive light, which is kind of crazy to think about when as we kind of we said at the start of this, the Great Recession was coming this year, you know, hell or high water was bunker down and whatever phrase you want to use, really, you haven’t seen that.

Dave Armstrong [00:15:11] Yeah. It’s also an interesting because because what you said was it’s really hard to bring inflation down when you have, you know, a strong economy. I mean, theoretically it is, but but we just talked about having, you know, a a reasonably strong economy and inflation has come down off that 9% number. I’ll just throw out I, I in in days of past I used to harp on and pound the table all the time on housing and cars. Housing and cars. Housing and cars. That’s what drives the economy. It’s the biggest there’s so much that comes off of housing and cars and I don’t know, we we the four of us haven’t talked much about the auto industry, but I’ll tell you that if you look at auto inventories, days of inventory of dealerships, you start looking at Ford and Chevy and even the venerable Toyota. Right. Which has this weird cult following. I don’t know, Erin, You’d have to explain that to everybody. But they’re not selling those incentives. They’re they are packaged these dealers are packing incentives on because they’re paying such a high interest rate to keep those cars on the lot. They’re not selling. There’s like 100 days of inventory of cars out there. And so if car prices are going to start coming down and housing prices are coming down because interest rates are keeping people from buying houses and or there’s no inventory, So nobody’s buying houses. I mean, we could see the inflation rate come down even with the strong job market and a strong economy. I heard a term the other day that somebody asked about hard landing versus soft landing with how about no landing? Right. How about how about there is there’s no it just keeps kind of keeps going. I mean. Sorry. We’re going to get to my inflation prediction at the end.

Jessica Gibbs [00:16:48] So other than the lack of recession, were there any other big surprises from the quarter or the first half of the year?

Nate Tonsager [00:16:54] Biggest surprise from the it’s really the first half of the year, more so than the quarter is you’ve had escalating war in Eastern Europe, you’ve had bank failures, you’ve had a litany of really bad headlines, especially if you’re on social media as much as myself, Nate and Dave are. Yes, here we are, up 15% in the S&P year to date. So it’s the wall of worry that we’ve we’ve written about that a lot. Seems like a cliché phrase, but it’s exactly what it is. And I believe, Nate, you brought up the topic of, you know, an inverted yield curve. So we are now well over a year of the yield curve going inverted. In fact, at certain parts of the curve, it’s the steepest it’s ever been in terms of the difference between the long end, in the short end. And we’ve had a few people writing in. It hasn’t been here very recently, but it’s been within the past six months or so, which basically. Vehement disagreement with some comments I made in the portfolio updates in the past saying. Don’t put it past the market. As we all know, the market’s a discounting mechanism. Perhaps 2022 is really discounting the fact that we either were in or already had a recession in 2022 or 2023. And you’re starting to see the burgeoning of a of a bull market potentially. Right. I don’t think that that comment was so far off base, especially given what we’ve seen here year to date and seeing the behavior of this market. We’ve talked about the S&P cap weight versus equal weight outperforming. Let’s not discount the fact, though, that there are actually beneath the surface, despite the fact that cap rates outperforming equal weight, the markets going out on 52 week highs, we’re only 9% below all time highs. This is stuff that people who want to believe that we’re going to have bad economic data, a bad recession that’s going to somehow, you know, throw the market into a horrible correction. This isn’t the type of environment that you would be you’d be seeing. This is the type of behavior from a market that you’d be seeing. So I would say that’s the biggest surprise. Big air quotes there, not necessarily from the last quarter, but just from this year to date.

Nate Tonsager [00:19:02] On kind of a similar surprise for me. Right. The resilience of the market. Right. Erin just mentioned all kind of, you know, those headlines that haven’t been able to knock it down. You know, let’s talk about the Fed, right? That seemed to be what knocked it down last year. You know, and we when we recorded the Q1 podcast, markets had we’re pricing in a 67% chance that the Fed was going to cut this November in a couple of months. Well, if you look at it today, they’ve priced in one more hike at the upcoming meeting at the end of July and maybe even one more. And the easing action has now moved all the way to 2024. Now, if you think about that, right, we took cuts off the table and we added a hike. Well, stocks can’t go up if rates are going higher and the Fed’s hiking rates, well, that’s just not true. I mean, if you can see kind of like, Dave, what you were saying with the no landing, the Fed has been able to hike, the market has adjusted and we are okay, like it seems to be. We’re on kind of a path of what does higher interest rates look like. We were never going to stay at 0% forever. And it seems like the bigger concerns that the market had and the uncertainty that was at it was around the speed of the hikes, which makes a lot of sense. Right. If you’re running a business, if you have credit card debt as a consumer, you know, any kind of lending, if your interest rate doubles, triples, you know, goes from 0 to 5% overnight, that’s a big shock. Well, now we’re seeing in 2023, we’re not going from 5% to 10%. You know, that uncertainty is slowly dwindling away as we seem to be closer to the end of Fed hiking than the beginning. Right. So the markets can be resilient in a market where they can in an environment, I should say, where they can plan. And that’s what you’re seeing now, right? The difference between five and five, 25, 550 is much smaller than 0 to 5.

Dave Armstrong [00:20:48] Yeah, I think. What was it that Yogi Berra famously said? It’s tough to make predictions, especially about the future. You know, I yes, I’m sorry. I’m starting to like I may tape it on my monitor. But, yeah, it’s, you know, my biggest surprises. I kind of said them in the beginning, but I will I will punctuate my biggest surprises by saying another one of my big surprise was the disconnection in people’s evaluation of portfolios. Because if we were recording this back in October of 2022, people would be saying, Thank God I’m not down. Thank God I don’t have those big stocks in my portfolio because I’d be down 60, 70%, something like that. People be like, I’m really glad I’m in a diversified portfolio. Then you fast forward. Now today people are like, Hey, I just looked at my my performance the other day and, you know, I’m massively underperforming the S&P 500. Per riends. For the first quarter of the year when the S&P 500 is up 15%. You know, they’re massively underperforming. You know, you got to you got to make sure that you remember what you felt like back in the fall of 2022. And I will proffer that the the biggest surprise that I have is seeing people trying to adjust their portfolios now or listening to people talk about wanting to adjust their portfolios now to get into the big tech names that back in October they wouldn’t have touch with a ten foot pole. And so I guess my biggest surprises that the the lack of sort of short term memory on some of these things and I’m not I’m not hounding people or criticizing. I’m just saying I do see some of that kind of just day to day conversations with people.

Nate Tonsager [00:22:30] Reminds me of something I learned very early in my career when I was working with kind of under an apprenticeship kind of program with a mentor. He he taught me to keep a journal, right. Of the like, how do you feel? Not like what happened in the markets, what are the returns, but how do you feel when big events happen? And it’s kind of I thought it was kind of hokey at the time, like I’m going to write down my feelings in a journal, like I’m a calculated investment manager. It matters gives you perspective for the long term or even just through different cycles, like you said. Tale of two markets.

Dave Armstrong [00:22:57] Yeah, we’re cleaning out our office now. This is two listeners. We’re cleaning out our office now because we’re moving in October. And Jessica discovered this big box of all these old notebooks that I had from back in the mid to mid 2000 ish. And she’s like, What is all this stuff? I’m like, This is like my emotional notebook. It’s like I would paste things in. I had a glue stick and I would cut research reports out, put it in there as funny to look back through there and say like, Wow, this is what people were saying and feeling back in 2008 that that is kind of valuable. I just remember having a hard time parting with them, by the way. But anyway.

Jessica Gibbs [00:23:30] If we need to find a home for them for sure. I’m sure if we fast forward, even forward, more forward in time, that they’ll they’ll still be interesting to look at. Possibly even more so. So. Okay. So you guys have thrown out a lot of data points this episode. And I’m thinking about my parents, who are both scientists, who taught me, you know, not just about the data, but what does the data mean? So, hi, mom and Dad, because I know you’re listening. So, yeah, what does all this data mean? And, you know, in particular, you know, for people listening, what should they be doing with this information?

Nate Tonsager [00:24:08] I guess to me, right. We kind of talked about how the recession doesn’t seem like it’s right on the doorstep. Right. But that doesn’t mean that there’s not action that you could be taking. You know, I think it’s a big thing we talk about a monument constantly is you want to be raising cash kind of when you don’t need to. Right. So right now, the markets have recovered after a horrible year of 2022. Data seems strong. If you need or know you’re going to need cash, now is a bad time to call up your wealth manager or call us up and have a conversation about where do we raise that from, you know, And kind of the second piece of that is interest rates are likely to continue to be higher for longer as what the Fed keeps saying. So having money in cash on the sidelines is no longer a zero yield asset. Right? So now you have kind of an opportunity cost or a trade off of, hey, I can take money off the table that I know I’m going to need and earn a little bit of interest along the way. So it’s kind of a standard point that we can, I would say make up monument quite frequently, but it’s really, really relevant given the market environment that we’re in.

Erin Hay [00:25:08] Yeah, that’s that’s really good advice. And before I talk about kind of my little take on what to do with this data, what does it mean? I want to go back to Nate. You talked about assessing your feelings about the markets in a journal. I was actually having a conversation about this with a good friend who is an advisor, and we just talk about broad market topics and we actually have a text message thread going back several years. And I’ve actually thought it would be a fun project to rip out the entire thread and to go back and look at all market commentary, what our thoughts and feelings were at certain points along the way. Then take some sort of an S&P 500 total return graphic and put quotes. You know, Erin thought X, Y, and Z on this day. Well, what was happening at the moment? What were the forward returns there? That actually be a really fun exercise. We should probably do something like that here, a monument as well. But going back to Jessica.

Dave Armstrong [00:26:00] Yeah. Yes, you were you were texting or you were texting a friend and not a client, just to be clear. Right? I mean.

Erin Hay [00:26:05] Correct friend. Not a client, Right?

Dave Armstrong [00:26:07] Friend. Just be right. Yes. Yes.

Erin Hay [00:26:09] So here’s what here’s my my take on this. So if history is any guide, don’t be don’t be shocked to see a pretty strong second half of the year. Ned Davis research put out a really good first half piece, a really good graphic here. I wish they would have totaled. I was actually totaling some some of these lines here. So going back to 1929, there have been 28 instances where the S&P 500 has been up 10% or more in the first half of the year. Looking back at that data, there have only been one, two, three, four times that the second half has been down over 5%. And in fact, when you look at all the data combined, the median forward return for the second half of the year is basically 10%. So that historical data lined up with some really strong numbers that Nate’s laid out and also lined up with a lot of market internals and technicals about stocks going out at 52 week highs, about being really close to all time highs again in the S&P. That to me just says that this market’s going to continue to surprise people in the way that that in ways they absolutely don’t expect. And that’s what the market does is it tries to turn, you know, consensus on its head in shock surprise and befuddle the most amount of people in the harshest way possible.

Dave Armstrong [00:27:33] Yeah, I agree. I would say it piggybacks a little bit on what everybody already said and I’ve kind of said, but I’ll I’ll I’ll condense it which is review your portfolio. Right. So if you are happy with your S&P 500 returns or even greater then because you’re concentrated in the tech sector, right? So at the start of 2023, the S&P 500 waiting for the info tech sector was 26%. So so a quarter of the S&P 500 is made up of information technology stocks, which as a sector had a year to date return of 43%. And that contributed 11 percentage points of the roughly 17 percentage points of of return. So even if you’re not overly concentrated in the tech stocks and I’ll just use an extreme example, let’s just say all you have is an S&P 500 index fund. I go back to what Nate was saying, which was, Hey, if you’re really bummed out in the fall of 2022 with your portfolio, but you were living out of your cash, chances are you didn’t really make any adjustments in your portfolio and you did participate in that post October 13th inversion in market returns, right? Great. You’re probably not bummed out if you were raising cash on October 12th because you didn’t have enough and you had to pay your, you know, your fourth quarter bills or whatever it is, you’re really bummed out. So I would say remember back how you felt at that time. Apply that emotion to where you are today. And like Nate said, look at it and say like, is now a good time for me to top off my drink? My cash portfolio is. Even if you think that the portfolio that that the market is going to keep going up over the like. To Erin’s point, you’re scared or whatever. I mean now you will never go broke taking profits. So if you’re low on cash. Okay, If you’re low on gas. Pull over at the next gas station and fill up. If you still have a full tank, keep driving. That’s kind of what I think people should do. So evaluate your holdings.

Erin Hay [00:29:49] I love that. Saying no one goes broke taking profits. Like slap that up next to Yogi Berra. Quote, like, those are the two you should have in front of you. It’s so true.

Dave Armstrong [00:29:58] Right. I don’t know who said it, but let’s just attribute it to me. I said it. Meanwhile, I get a call from Warren, Warren Buffett’s lawyers or something saying that, you know, I plagiarized this, saying I don’t know who said it, but. Yes. Right. Exactly.

Jessica Gibbs [00:30:09] Copyright. Yes.

Dave Armstrong [00:30:11] All right, Jessica, keep us on track. All right.

Jessica Gibbs [00:30:12] Well, long time listeners, I know I want to wrap it up. So long term listeners will know that on these quarterly market recap episodes, we’re big fan of predictions, which I think Dave is maybe more enthusiastic about and are a little bit grudging. But we appreciate you playing along. So I feel like.

Dave Armstrong [00:30:32] Well, it’s just for entertainment, right? It’s kind of just.

Jessica Gibbs [00:30:34] I know it’s for fun.

Dave Armstrong [00:30:35] Everybody likes a prediction.

Jessica Gibbs [00:30:36] Yeah. So let’s think about, you know, the predictions that Dave, and Nate you guys made at the end of the Q1 episode, There’s still a lot of time left on those predictions. I know, Nate, your prediction was that the Fed won’t cut their rates in 2023. And Dave, your prediction was that will be up 15% on the S&P by end of year. So we’ll still still see how how we go towards those predictions. But, Erin, I think you said you could probably do a temperature check on your prediction from Q1.

Erin Hay [00:31:06] Yeah, I actually can’t find my explicit prediction from Q1. I don’t think it would have been that far out there. And if it it was was probably something football recruiting related. So I don’t know about that, but I’ll go out on a limb. Actually, this isn’t even really going out on a limb. This is kind of linear from what we just talked about for the second half of the year. I’ll just say that the S&P 500 from here to the end of the year not going to talk about the the path, how we get there, but I think we’re going to end up another bright on the nose 10% from from June 30th through December 31st of this year. We’re going to have 10% in the S&P 500.

Dave Armstrong [00:31:39] So tacking on another 10% on top of what we’ve got.

Jessica Gibbs [00:31:42] For the second half of the year.

Erin Hay [00:31:44] Tacking on another 10% from where we are, where we started the quarter, correct.

Nate Tonsager [00:31:48] History as a guide. Right, Aaron kind of laid it out. I mean, it wouldn’t be that far off, like the historical kind of that would be what is the data has shown. Now, I agree with you, though. I would love it. And I’m also going to just circle back to my prediction, because I do remember I have a Jimmy John, so that is looking pretty tasty between Erin and myself. So a lot of time left that they still might cut their data changes quickly. Like I was kind of talking about earlier, right? They had easing action priced in a few months ago and now they’ve totally reversed that.

Erin Hay [00:32:18] That might have been my first half or first quarter prediction was just I wanted to get a sub. So I, I said that the Fed would cut rates by the end of the year.

Nate Tonsager [00:32:26] Yeah, it still could happen. Like you were saying, Jessica, a lot of a lot of time left in the game. So and they move fast and the economy moves fast. It’ll all be data dependent.

Dave Armstrong [00:32:36] Yeah, let’s remember to do this. So when we do our 2023 market review or the fourth quarter, right, this version of the fourth quarter and the year end, let’s dig up and find out what some of the predictions were for the S&P 500 from the major shops there, their 2023 forecasts. And then let’s compare them to our guessing. And if we’re winners and we will crown ourselves with greatness, and if we’re losers, we will just say everybody’s guessing and nobody has any idea what they’re talking about. So that sounds good.

Jessica Gibbs [00:33:10] Sounds good. Yeah.

Dave Armstrong [00:33:12] Here’s my quick prediction again. This is just for entertainment. Okay? I have this feeling. It’s a gut feeling that. This inflation coming down story is not over. And I sense we’re going to be a lot closer to that Fed target rate of 2% than anybody else thinks we are currently. So we’re at like four now. I’m saying we’re way closer to two than we are at a four, if not at two by the end of the year. And my rationale for that gut feeling is housing and cars. Okay. That’s just my gut feeling there. I also feel like we have definitely seen the last of any rate hikes, even though there’s predictions that there’s a couple more rate hikes against coming up. My prediction is be based on that inflation number. We’ve seen the last of the rate hikes. That’s it. That’s my table slapping prediction.

Jessica Gibbs [00:34:10] It’s a good one. All right. Well, we’ll see. We’ll see how how these predictions pan out. It’s always fall to our Q3 market recap episode. As Dave said in the beginning of January 2024, we’ll do a full look back at the 2023 market year. So thank you guys, as always for your expertise. And thank you everyone who’s listening. We really appreciate it.

About "Off The Wall"

OFF THE WALL is a podcast for business professionals and high-net-worth investors who want to build wealth with purpose. A little bit Wall Street, a little bit off-the-wall; it’s your go-to for straightforward, unfiltered wealth advice on topics that founders, business owners, and executives care about.

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