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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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Community College TY students become qualified baristas

School Dayz Transition Year students at Killarney Community College spent last Tuesday learning the skills to become baristas. They completed a full-day training course and are now qualified to make […]

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School Dayz

Transition Year students at Killarney Community College spent last Tuesday learning the skills to become baristas.

They completed a full-day training course and are now qualified to make coffee, which could make them very employable in local cafes and restaurants this summer.
Their teachers, who are described as the school’s “resident coffee experts,” were impressed with the students’ hard work and enjoyed the lattes, cappuccinos, and Americanos the students made throughout the day.
In addition to their barista training, the TY students also took a trip to Mallow. There, they learned about the rules of the road, practiced the driver theory test, and many got behind the wheel of a car for the first time. They also learned about the dangers of speeding and driving under the influence of alcohol and drugs.

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Rising stars Amano and Lillie Foley to share stage in ANAM

Two of Killarney’s rising musical talents, Amano and Lillie Foley, are set to perform their first ever joint headline concert at the ANAM Cultural Centre. Singer-songwriter and sean nós singer […]

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Two of Killarney’s rising musical talents, Amano and Lillie Foley, are set to perform their first ever joint headline concert at the ANAM Cultural Centre.

Singer-songwriter and sean nós singer Amano will bring her ‘Mythilligocial Meitheal Tour’ home for a special live performance of both her contemporary and traditional music.

Joining her on the night is local rising star Lillie Foley, making it a special event to celebrate two young Killarney songwriters making their mark on the Irish music scene. The event is supported by Kerry County Council Arts Office.

Amano, described by Hot Press in 2024 as an “idiosyncratic talent” is comfortable performing in both English and Irish, draws influences from alt-folk, R&B, and traditional sean-nós singing.

Her project THREAD was nominated for Irish language Album and Song of the year at the Gradaim Nós in 2024.

Her recent singles, ‘Burn’ and ‘The Birthing House’, have received airplay on RTÉ Radio 1, Radio Kerry, and Raidió na Life.

Lillie Foley, a 22-year-old singer who recently graduated from the Irish World Academy of Music and Dance with a BA in Voice, has released two debut singles in 2025, ‘Someday’ and ‘That’s Life’, which blend pop, soul, and folk genres.

The event is supported by Kerry County Council Arts Office.

The concert will take place on May 23, at the ANAM Cultural Centre in Killarney, starting at 7:00pm. Tickets are available from €15 plus a booking fee on Ticketpass.org.

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