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And just like that, everything changed

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By Michael O’Connor

I spoke last week about the fragility of the most recent upward trend in markets.

We are in the interlude between inflation peaking and economic data slowing, a momentary sweet spot if you will.

Well, the interlude is over, and the sweet spot is no more, ground to a shuddering halt by a direct and concise message of intent from Fed chair Jerome Powell on Friday.

“While higher interest rates, slower growth, and softer labour market conditions will bring down inflation, they will also bring some pain to households and businesses. These are the unfortunate costs of reducing inflation but a failure to restore price stability would mean far greater pain.”

In short, don’t be surprised to see more market volatility and economic pain as interest rates continue to rise in an effort to cool inflation.

Sometimes pain is for the greater good, apparently.

Outlook

After clawing back over 50% of their losses, stocks are at a crossroads.

As we move away from inflationary woes toward economic growth concerns, market uncertainty will most likely result in back-and-forth trading with no clear direction in site.

As I mentioned previously, the V-shaped recoveries we have come to know and love over the last 2+ years are far less likely.

The liquidity and support that fuelled previous reversals are now being stripped out of markets. Fundamentals will continue to be reset to account for this.

Expectations will need to be moderate as we enter a period of slower growth.

My Predictions

None of the major asset classes looks overly attractive in this market over the short term.

Stocks and bonds continue to reset, and the point of entry remains unclear given the risks that remain.

With that said, buyers remain on the sidelines and using any pullbacks as a chance to top up on high-quality stocks with strong free cash flow is advised.

Although fundamentals are being reset as future earnings get revised downwards, many of these high-quality names are more profitable than ever and have the capital on hand to buy-up market opportunities where they see fit.

Funding these purchases by reducing your positions in non-profitable growth is also advised.

Many of the pandemic high-flyers will continue to bleed out.

Supply/demand issues should keep oil prices elevated over the medium term but expect considerable volatility. Some high dividend energy companies should provide some attractive yields in the process.

Bonds continue to add to their allure as the equity risk premium gets reduced, but interest rates have yet to reach their ceiling. With that said, the 10-year Treasury at 3.5% seems like a solid entry point to build up long-term exposure.

While I believe that interest rates will be higher for longer, I don’t believe that rates can remain elevated for very long, making treasuries an interesting investment.

The current aggressive Fed policy that brings interest rates to these higher levels will initiate an economic slowdown that is only alleviated by reducing the very rates that caused the slowdown in the first place.

And round and round we go.

For free weekly stock tips and direct access to my personal investment portfolio, go to www.theislandinvestor.com.

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Tree of Light ceremony on Monday

The spectacular 100ft Tree of Light in Killarney, festooned with close on 3,000 lights and topped with a giant star, will again illuminate the town this Christmas with the official […]

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The spectacular 100ft Tree of Light in Killarney, festooned with close on 3,000 lights and topped with a giant star, will again illuminate the town this Christmas with the official switch-on date planned for Monday next, December 8.

The lighting up ceremony will take place after a community Mass in the adjacent St Mary’s Cathedral at 6.15pm and a short prayer service will mark the big switch-on.
The towering Tree of Light is a landmark giant Californian Redwood tree located just outside the main door of the Pugin-designed building.
The project is an collaboration between a sub-committee of Killarney Chamber of Tourism and Commerce and the Killarney parish and it creates a wonderful focal point in the town in the lead up to and during the festive season.
Killarney Parish Administrator, Fr Kieran O’Brien and Christmas in Killarney Chairman, Cllr Niall Kelleher extend a warm invitation to all community groups, schools, clubs and organisations, families and individuals to attend the special Mass next Monday evening or to visit the tree this Christmastime.
The feature star on the spectacular tree will take on an extra special meaning this year as it will be dedicated to the late Donal Grady, a long-serving local councillor and former Mayor of Killarney who worked diligently and passionately for the community.
Donal, who passed away in 2024, was a dedicated public representative who worked with great passion and a real sense of purpose on behalf of his loyal supporters.
Through his work as a long-serving chief fire officer in Killarney, he helped so many families at a time when they most needed assistance and reassurance and he brought a great sense of calm and responsibility to the position
The Tree of Light was first lit to mark the millennium year when it commemorated all those who lost their lives in the conflict in Northern Ireland and it was again illuminated in the mid-2000s to remember those who had been killed on Irish roads.
Since then the project is all about community and it celebrates the fact that Killarney is such a wonderful town to live in.
In the past, the star at the top of the tree has been dedicated to great community activists Johnny Hickey, Yvonne Quill, Paul Coghlan and Rena Kennelly.

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O’Donoghue planning National Rally Championship campaign

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Killarney’s Colin and Kieran O’Donoghue claimed victory in the Modified section of the Killarney Towers Hotel Killarney Historic Rally, delivering a controlled run in their Ford Escort Mk2 to secure Colin’s second win in the category and Kieran’s first.


At the finish ramp outside the Plaza Hotel on Saturday evening, Colin O’Donoghue confirmed he is considering a step into the Triton Showers Motorsport Ireland National Rally Championship next season.

He said he plans to travel to Mayo in March to see how the opening round suits before making a decision.

O’Donoghue set the fastest time on all nine stages to secure the win over second-placed Chris Armstrong/Conor Smith, also in a Ford Escort.


Third place went to Gary McPhillips and Conor Mohan, 17.9 seconds further back in their Escort.


The Modified section also featured the battle for the Carrick Cup, awarded in memory of Mike Gaine to the fastest Kenmare-based crew over Moll’s Gap.


This year it went to Tommy Randles/Darragh Lynch, who set the pace among the local contenders and finished 35th overall.

Randles, a long-serving club official, has hinted this could be one of his final competitive outings.


The best Kerry Motor Club crew was John Michael Kennelly / Dylan Harrington, who took fifth overall in the Modified division.

Dave Slattery / Denis Coffey continued their strong season with 13th overall (Class 6, 4th), while Hugh McQuaid and Rathmore school teacher Declan Casey placed 15th overall and sixth in Class 6.

Other locals included Seán Enright / Kevin Doherty who were Class 3 winners on the recent Thomond Rally and backed that up here with another steady finish in 26th.


Tadhg O’Sullivan /Frank Byrnes, Seán Hartnett/Kieran Doherty, Raymond O’Neill/Jason O’Connor, Cyril Wharton/Donal Falvey and Ray Stack/Gene Stack brought their Escorts home safely inside the top 40.

Gary Healy/Niall Myers, switching from a Civic to a Toyota Twin Cam 20V, took third in Class 5.


Paudie O’Callaghan/Daniel Murphy brought their Starlet home fourth in Class 4.


Noel O’Sullivan/Nicholas Burke, one of the few crews to have contested every Historic Rally since it began in 1996, finished 50th overall.


Killarney father-and-son team Tom and Mark O’Sullivan completed the demanding event in their Peugeot 205 GTi.

Representing Kerry Motor Club, Ken McKenna / PJ O’Dowd reached the finish in their Peugeot 205.

Kevin O’Donoghue / John McElhinney used Super Rally to return to the stages after mechanical trouble, as did Kenmare’s Shane McCarthy / Eamonn Creedon who were among several crews targeting future Carrick Cup success and completed their Honda EG6’s run under Super Rally as well.

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