June 2023 Investylitics

Horizon Advisor Network Investment Committee June 5, 2023

The Horizon Advisor Network Investylitics Committee met on the afternoon of Monday, June 5th. We were happy to have the entire team together to review recent research and commentaries. This was especially important considering the continued economic and political events driving the investment markets since our last meeting.

 Over the last 30 days, it seemed that you could not watch the news or go online without being met with a story about impending doom if the debt ceiling was not raised. We know that financial media feeds on negativity because it keeps viewers tuning in. However, as you can see from the graphic below, this is not the first time the media has been fixated on our national debt. As a matter of fact, this is now the 22nd increase in our debt ceiling just since the turn of the century.

Equity markets have initially responded in a positive manner to the debt ceiling resolution. Since politicians on the far left and far right of the political aisle both opposed facets of the deal, it was up to a unique combination of more moderate Democrats and Republicans in the House and Senate to pass the deal in a bipartisan manner.

 From a technical standpoint, markets have moved up towards levels last approached when the market peaked in August 2022. We also recognize that the market has been led by a very small number of tech and innovation stocks, driven by the excitement over AI advancements. As a matter of fact, the 10 largest stocks in the S&P 500 now make up more than 30% of the index. From a historical standpoint, such a narrow breadth does not indicate a strong and broad-based economic advancement.

It is also interesting to note that despite the media constantly shouting about the latest “crisis du jour”, the S&P 500 index is essentially flat over the last two years. We have seen periods of time like this before. From late 2014 to late 2016, the market ground sideways for nearly two years. Times like this require patience and faith that over time companies in our free market, capitalist economy will innovate and create products and services that US consumers want. This ultimately leads to revenue and profit growth. Over time, we know that stock prices follow earnings.

Source: BigCharts.com

All eyes will now turn toward the Federal Reserve Bank’s meeting next week. Chairman Jay Powell had previously hinted that the Fed may be nearing a point where they will pause their interest rate increase campaign. This would allow them to evaluate what progress has been made in the fight against inflation. This may be especially important in light of the recent uncertainty in the banking system, including the failure of three regional banks. 

We got an unexpectedly strong employment report last Friday. It showed that the economy created far more jobs than expected, while also revising upward the estimates from the previous two months. This may give the Fed additional incentive to raise interest rates further to fight persistent core inflation measures. 

The May consumer price index report will be an important data point for the Fed to consider. It will be released next Tuesday, June 13th. This comes just ahead of their interest rate decision the following day. Our committee will continue to closely monitor these economic and investment issues and their impact on our model portfolios.

 We want to remind our clients that may need funds from their portfolio over the next 6 to 12 months, that upticks in the market like we have seen recently give us an opportunity to take some gains off the table while markets are at near-term highs. This will allow us to take create some liquidity and reduce risks in the event of any near-term pullback in the markets. Please reach out to your advisor if you have questions about your unique situation.

 As always, our committee stands ready to take action or make necessary adjustments to balance the risks and opportunities for the benefit of you, our trusted friends, and clients. We want to remind you that diversified portfolios, constructed to help you meet your financial planning goals should not be adjusted or altered every time a new headline crosses your TV or computer screen. Your plan should be your NorthStar and guide you in making decisions for you and your family. We are here to help you navigate your way through these choppy and challenging economic waters. Thank you for your trust in our team and our process.

© 2023 Jesse Hurst

The views stated are not necessarily the opinion of Cetera and should not be construed directly or indirectly as an offer to buy or sell any securities mentioned herein.  Due to volatility within the markets mentioned, opinions are subject to change without notice. Information is based on sources believed to be reliable; however, their accuracy or completeness cannot be guaranteed.  Past performance does not guarantee future results.

Investors cannot invest directly in indexes. The performance of any index is not indicative of the performance of any investment and does not take into account the effects of inflation and the fees and expenses associated with investing.

Sincerely,

Jesse W. Hurst, CFP®, AIF®
CERTIFIED FINANCIAL PLANNERTM
Financial Advisor

*Award Recipient Jesse Hurst 

*The 2021 ranking of the Forbes’ Best–in–State Wealth Advisors¹ list was developed by SHOOK Research and is based on in–person and telephone due–diligence meetings to evaluate each advisor qualitatively and on a ranking algorithm that includes client retention, industry experience, review of compliance records, firm nominations, and quantitative criteria (including assets under management and revenue generated for their firms). Overall, approximately 32,725 advisors were considered, and 5,000 (approximately 15.3 percent of candidates) were recognized. The full methodology² that Forbes developed in partnership with SHOOK Research is available at www.forbes.com. 

¹ This recognition and the due–diligence process conducted are not indicative of the advisor's future performance. Your experience may vary. Winners are organized and ranked by state. Some states may have more advisors than others. You are encouraged to conduct your own research to determine if the advisor is right for you. 

² Portfolio performance is not a criterion due to varying client objectives and lack of audited data. SHOOK does not receive a fee in exchange for rankings.