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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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Credit Union launch a new collaboration with Gilroy’s Green Energy Ltd.

Building on recent success the Credit Unions of Kerry and West Limerick have launched a new collaboration with Gilroy’s Green Energy Ltd. Gilroy’s Green Energy Ltd specialise in Photovoltaic (PV) […]

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Building on recent success the Credit Unions of Kerry and West Limerick have launched a new collaboration with Gilroy’s Green Energy Ltd.

Gilroy’s Green Energy Ltd specialise in Photovoltaic (PV) Solar systems that generate electricity, battery storage, air to water heat-pumps and much more.
Gilroy’s work with customers to receive the SEAI once-off grant towards the purchase and installation of solar photovoltaic (PV) systems and heat pumps for your home.
Collaborating with Kerry and West Limerick Credit Union expands the finance options available to Gilroy’s Green Energy Ltd customers to help finance new PV Solar Panel installations. Loan rates will be directly linked to the property BER starting from 4.7%(4.89APR) for an “A” rated BER.
Martin Gilroy; CEO with Gilroy’s Green Energy Ltd said: “We are delighted to officially launch this collaboration with the Credit Unions of Kerry and West Limerick. Customers have already reaped the benefits on recent installation projects after contacting their local Credit Union. Having a direct link to local Credit Unions allows us to guide customers to affordable financing options based on the specific installation quotation we provide at very competitive rates.“
Speaking on behalf of the Kerry and West Limerick Credit Unions, Ashley Fitzgerald added: “We are delighted to have Gilroy’s Green Energy Ltd come on board as part of our Greener Homes Loan offering. Home Energy Upgrade have become a prominent concern and talking point among members in recent months, by Credit Unions having a direct link with Gilroy’s Green Energy Ltd allows both sides to make referrals and seek the best finance option for members. We are working hard building relationships with Green Energy Ltd providers as we want to ensure our members can avail of the best loan rates for all upgrade works.”
Credit Unions across Kerry and West Limerick. Abbeyfeale Credit Union, Cara Credit Union, Killarney Credit Union, Listowel Credit Union and Rathmore and District Credit Union can be reached via: www.creditunion.ie
Gilroy’s Green Energy Ltd can be contacted on 066-7115920, email info@gilroys.ie or for more information visit www.gilroys.ie.

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Racegoers Club to host Cheltenham Preview Night

Killarney Racegoers Club will host its annual Cheltenham Preview Night in Corkery’s Bar on March 7. Admission is free and this year’s chosen beneficiary is the Killarney Branch of St […]

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Killarney Racegoers Club will host its annual Cheltenham Preview Night in Corkery’s Bar on March 7.

Admission is free and this year’s chosen beneficiary is the Killarney Branch of St Vincent De Paul Society.
The expert panel includes professional punter Paddy Wilmott, leading jockey Conor McNamara, up-and-coming Kerry-based trainer Eoin McCarthy and local bookmaker Brendan Tyther with Vince Casey acting as the event’s compere.

“There is no admission fee but a raffle on the night for dual membership of Killarney Racegoers Club for the year, which includes 13 days racing and many reciprocal days to other race meetings,” said Mr Casey.

The Cheltenham Festival begins on March 12.

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