By Michael O’Connor, theislandinvestor.com
Stock Market Surge
Last week we saw a considerable rally in the stock market. On Thursday, lower-than-expected inflation figures were well received, resulting in the largest one-day rally in over two and a half years.
Although US inflation remains near its highest level since the early 1980s, the latest monthly Consumer Price Index report brought some relief. Inflation rose at an annual 7.7% rate in October - down from 8.2% in September. This was enough to push the NASDAQ up more than 8%, while the S&P 500 added 6% for the week.
So as improving inflation numbers push markets higher, should investors be jumping in headfirst to avoid missing yet another market rally?
Not Out of the Woods Yet
In the last two years, we have seen rapid market recoveries play out at breakneck speed as Monetary support, ultra-low interest rates, and fiscal stimulus all conspired to drive markets higher.
In simple terms, when money is free, and governments are hell-bent on continuously printing more and more of it, asset prices increase.
This exuberance pushed prices and valuation multiples to questionable highs. Now, however, the money printer has been turned off, and interest rates have increased dramatically, leaving us in a far less supportive environment. Unsurprisingly, asset prices have fallen accordingly.
This recent pullback has stripped out much of the excess from markets, leaving stocks trading at much more attractive prices.
Household names such as Google, Microsoft, Amazon, Tesla, Disney, Nike, Netflix, and Facebook have fallen between 30% and 75% in recent months. Now, the entry points into some of the best companies in the world are much easier to digest. This is welcome news for investors with a long-term outlook. But over the short term, it is vital to realise that many of these names are trading lower for a reason.
It can be tempting to assume that we will return to all-time high valuations now that inflation is starting to turn and markets have stripped out much of the excess in valuations. However, as we stare down the barrel of falling earnings, slowing economic activity, a less supportive monetary policy and persistent inflation, it would be naive to think that it’s all upside from here.
The positive momentum from last Thursday’s inflation print will fade, leaving market participants wrestling with the looming recessionary pressures.
Taking all the above into consideration, I believe the stock markets will remain within the 10% range it has traded in over the last month. This is likely to result in volatile horizontal trading over the coming weeks and months as positive moves due to falling inflation give way to market declines as earnings growth continues to slow.
The market appears to be moving past its overwhelming obsession with inflation, but unfortunately, this paves the way for all new worries. The slowing economic activity that is allowing inflation to fall in the first place now becomes enemy number one. Softer demand will lead to lower spending, leading to lower earnings which should theoretically lead to lower stock prices.
Unfortunately, the ferris wheel of worry continues to spin.
Considering all the above, I believe the stock market will remain within the 10% range it has traded in over the last month. This is likely to result in volatile horizontal trading over the coming weeks and months as positive moves due to falling inflation give way to market declines as earnings growth continues to slow.
Over the long-term, opportunities are more plentiful than ever as valuation multiples improve but for those expecting to make a quick buck over the coming weeks and months, proceed with caution.
If you have any questions reach out at www.theislandinvestor.com, I'm always happy to help.
Rathmore students look to the future
Students in Scoil Phobail Sliabh Luachra, Rathmore looked to the future as they explored third level opportunities. The teens took part in a number of activities to mark College Awareness […]
Students in Scoil Phobail Sliabh Luachra, Rathmore looked to the future as they explored third level opportunities.
The teens took part in a number of activities to mark College Awareness Week which was held in schools and other education settings nationwide last week.
The focus throughout the week in their school was to highlight the wide range of options open to them when they leave school and to realise that there are pathways to suit all types of learners.
Students from First to Sixth Year took part in activities to get them thinking about their future plans.
First and Second year students completed a module on ‘My Pathways’ and Third Years had an introductory talk on options after school.
Transition Year students worked on a display on all the options and pathways available after school which will remain up permanently.
Senior Cycle students attended the Careers Fair in Munster Technological University (MTU) where they got a chance to meet universities, colleges of Further Education, agricultural colleges, apprenticeship and more education and training providers from around the country including past sudent Aidan O’Mahony at the stand with An Garda Síochána.
Leaving Cert and LCA students had a really informative talk in school on Further Education and apprenticeships from Ella O’Donoghue, Admissions Officer of Kerry College.
The week finished with a talk for Senior Cycle students on Business and Law options in UCC by Ian Wallace.
“A highlight of the week was the involvement of past students, who sent us video clips on their career stories so far and shared tips with students,” Niamh Dwyer, Guidance Counsellor at the school, said.
“It was fabulous to see how well our former students have done and it was really important for our current students to see the diversity of pathways they have taken including apprenticeships, Further Education courses, university, travel, setting up businesses and returning to education as mature students. We are really grateful to the past students who reconnected with us for this week, their input was inspiring and invaluable.”
Students have education and fun London trip
Leaving Certificate students from St Brigid’s returned home Saturday night after a hectic four-day tour to London. The 87 girls took a tour of London on their first day in the city […]
Leaving Certificate students from St Brigid’s returned home Saturday night after a hectic four-day tour to London.
The 87 girls took a tour of London on their first day in the city after landing. They visited some of the famous locations on the journey, such as Big Ben, the Houses of Parliament, Westminster Abbey, and Trafalgar Square. They enjoyed a night at the Lyceum Theatre in the West End watching ‘The Lion King’.
The girls went to The Natural History Museum on day two, which has one of the world’s greatest collections of historical artefacts. They took their time looking around the massive cathedral-like structure’s sculptures and frescoes. Four coloured zones that focus on topics including the environment, evolution, the planet, and wildlife make up the museum’s divisions. They then took pleasure in a trip to the fascinating Science Museum. It was the ideal location for someone with an inquisitive mind, full of amazing things to do and explore.
The Victoria and Albert Museum was the next stop on the itinerary. The V&A’s collection of art spans 5,000 years, from prehistoric periods to the modern era. The Mouse Trap, an Agatha Christie play, was the entertainment for this evening at the St Martin’s Lane Theatre. The play’s 70th anniversary was this week.
On day three, the girls boarded a capsule for a 30-minute spin of the London Eye and marvelled at the breath-taking sights of London. After that, they went to the Royal Observatory Greenwich’s Planetarium and Astronomy Centre, where they experienced an amazing adventure through space. They went to the Prime Meridian in Greenwich, planting one foot on the eastern and the other on the western hemisphere of our planet.
The girls ended their evening at what was a highlight for many at Winter Wonderland in Hyde Park.
On the final day before flying home, the girls went to Oxford Street to do a spot of shopping.
“A great trip was had by all where many memories were made,” said Sheree Murphy, one of the teachers who travelled with them on the trip.
Rathmore students look to the future
Students in Scoil Phobail Sliabh Luachra, Rathmore looked to the future as they explored third level opportunities. The teens took...
Students have education and fun London trip
Leaving Certificate students from St Brigid’s returned home Saturday night after a hectic four-day tour to London. The 87 girls took a...
Santa is coming to town – and the Outlet Centre!
Santa has made a special arrangement with Mrs Claus that he will spend every Saturday and Sunday afternoon at Killarney...
How to have the best skincare routine at home
By Jill O’Donoghue from Killarney Toning and Beauty Studio Home care is essential for glowing, youthful skin. It’s like brushing...
Annual Christmas motorbike charity road run launched
The Kerry Bikers are hosting their annual Christmas Bike Run on December 18. The event will raise funds for St...