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Market sentiment has flipped again

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By Michael O’Connor

Last week, the three-week losing streak that saw the S&P 500 drop over 8% ended as markets bounced from seemingly oversold positions.

Investor sentiment flipped as the recent pullback created buying opportunities.

The S&P 500 rose nearly 3.7%, while the NASDAQ’s gained 4.1% to help it recover some of the 11% it lost in recent weeks.

But on Tuesday of this week, the market sentiment flipped again.

The August inflation print, widely expected to show falling US inflation, showed the opposite.

Falling gas prices and improving supply side pressures were not enough to offset price increases in both food and shelter.

CPI climbed 0.1% month over month in August, accelerating from 0.0% in July.

Even though we’re talking about just one report, it’s enough to raise doubt about inflation being under control which has knock-on effects regarding how aggressive the Fed needs to be as they attempt to cool the economy.

While this is undoubtedly a negative indicator that was always going to trigger a sell-off in the short term, if we zoom out, I’m not sure it considerably changes the position we are in.

The Fed was going to stay on track to tighter monetary policy whether inflation was 8.1% (expected) or the 8.3% reported.

So if the long-term picture has not changed dramatically, but prices are falling, what does this mean for investors?

Outlook

Everything seems relentlessly bearish at the moment.

The recession obsession is everywhere.

There are obvious reasons to be fearful, you hear them every day, but this isn’t the beginning of the end.

Contrary to general market consensus, I think we are close to peak bearishness with much of the negative outlook for the economy now priced in (the Nasdaq composite index is down 26% so far this year).

We are not quite there yet. The lows in June will likely be retested over the coming days/weeks, but I don’t expect much pain past this point.

As such, investors shouldn’t look at this current selling as a reason to run for the hills. Instead, view this as an opportunity to invest in your favourite companies at discount prices.

To quote Warren Buffett:

“Our goal is more modest: We simply attempt to be fearful when others are greedy and greedy when others are fearful.”

Are we in a downtrend where rising interest rates and inflation pressures are forcing investors to reassess equity valuations?

Yes.

Is this repricing within the realm of standard market conditions as we reset our expectations following a decade of relentless Fed support?

Yes.

Is the apocalypse coming?

No.

Despite the headlines, It’s not all bad news.

Company earnings have held up well
Labour markets remain strong
Supply-side inflation pressures have eased,
Interest rates hikes are likely to slow following the FOMC meeting this month
This year’s pullback has stripped much of the excess out of markets
As I have discussed previously, we are unlikely to have the same rate of recovery we experienced when the Fed was funding asset price inflation.

Market uncertainty could result in horizontal trading for quite some time, but all is not lost.

Without a new macro shock, I don’t see markets falling significantly below the lows set in June.

Time to put your money to work.

To learn what companies to invest in and to 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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