On Air with Altair: 2Q 2023 Market Review Video
Want to hear Altair’s analysis of the markets, but lack the time to read all of Altair Insight? Watch our video summary of the report or listen to the podcast episode and get caught up on our market review in 3 minutes.
STOCKS RALLY BEHIND TECH GIANTS
The so-called “Magnificent Seven” tech stocks have led the U.S. market into bull territory in a continuing turnaround from last year. The seven companies – Nvidia, Meta, Tesla, Amazon, Apple, Microsoft and Alphabet – have benefited from investors’ enthusiasm for the prospects of artificial intelligence. Non-U.S. stocks also have delivered impressive gains. The extent of first-half performance will be hard to match for the rest of the year. Stocks face continued hurdles in the form of high interest rates, inflation and a cooling economy. Yet despite the challenges we believe the market is well-positioned to deliver further gains this year.
PROGRESS ON INFLATION SUGGESTS RATE HIKES ARE OVER
The Federal Reserve has just raised its benchmark interest rate for the 11th time. Barring a dramatic change in data, we believe that was likely the final increase in its 16-month tightening campaign. Fed officials have been warning this summer that they need to maintain a restrictive monetary policy in order to ensure that inflation is fully under control. With inflation down sharply and still descending, however, we are skeptical the Fed will follow through on some members’ call for further tightening. The Fed deserves credit for the effectiveness of its monetary policy so far – as long as it does not overtighten. With economic and inflation data working in its favor, we believe it has made its final rate hike.
U.S. ECONOMY IS BALANCED AND RECESSION-FREE
Pundits’ gloomy warnings about a recession coming have not yet come true as a recession is nowhere in sight. The economy has some soft spots, so a recession is still possible. However, improving data in recent weeks strongly reinforce our view that any recession would not be serious and is unlikely before 2024. A sturdy labor market, continuing consumer spending and robust capital expenditures have mitigated the chances of a significant slowdown despite pressures from inflation and rate hikes. The economy is not booming, but it is stable and growing.
Inflation is unlikely to reach the Federal Reserve’s 2% target rate before 2024, but its descent takes pressure off both the economy and the Fed. We expect the Fed to hold rates steady until next year absent a recession, which we do not expect this year. The global economy, too, continues to grow despite China’s economic problems.
Past performance is not indicative of future performance, and all investments are subject to the risk of loss. This material is for informational purposes only and should not be construed as an offer to sell or buy any security. Material contained in this communication should not be construed as accounting, legal, or tax advice. We encourage you to contact us with questions regarding the material shown.