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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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Dancing classes set to unite communities

By Michelle Crean There’s no language barrier when it comes to dancing – which is why one local group is organising classes to unite communities. KASI, the Killarney Immigrant Support […]

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By Michelle Crean

There’s no language barrier when it comes to dancing – which is why one local group is organising classes to unite communities.

KASI, the Killarney Immigrant Support Centre, has teamed up with dance instructor John Moriarty to teach both Ukrainians and multiple cultures living in Kerry Irish set dancing steps from next week.

The first class will take place on Tuesday evenings, starting next week (September 27) at St Mary’s Parish Hall at 6.30pm and all are welcome to join.

The idea is to help Ukrainians living in Killarney and Kerry to come and have fun and get to know locals better, KASI coordinator, Marilyn Catapat-Counihan, explained to the Killarney Advertiser.

“We have a women’s group for all ages where we do crochet, sewing and art and crafts, where they can talk which is good. I had the music on and they were dancing. I asked if they would like to do dancing classes so I organised it with John Moriarty who is well known in Killarney.”

She added that the women are very excited to learn set dancing and get to know other people from the area.

“Sometimes when you meet new people the language can be a barrier and when you’re dancing everybody is moving. He will open it to everyone so there’ll be integration, it’s fun as well. They are all very excited.”

To find out more contact John on 086 1579381.

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Multiple Sclerosis Walk celebrates 20 years

By Sean Moriarty The rising cost of fuel is already having a negative effect on charity events with some limiting numbers. On October 9, the annual Multiple Sclerosis South Kerryv Walk […]

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By Sean Moriarty

The rising cost of fuel is already having a negative effect on charity events with some limiting numbers.

On October 9, the annual Multiple Sclerosis South Kerryv Walk takes place over the Old Kenmare Road.

First run in 2002, this year’s event will celebrate 20 years since its foundation but two years were lost as a result of the pandemic.

This year’s walk will be limited to 150 people – three coach loads – so event organisers can cut back on running costs.

It will only be possible to participate in this year’s event if walkers pre-register.

“Walkers must raise at least €40 to make it worthwhile,” organiser John O’Shea told the Killarney Advertiser.

“Spaces are limited, 150 people equals three coaches and we need smaller coaches to get into the start of the Old Kenmare Road as that is just a bog road. We have limited numbers for cost and operational reasons.”

Mr O’Shea thanked event sponsors O’Callaghan Coaches and The Gleneagle Hotel for their support of the event.

Registration forms can be obtained by calling John on 087 2348824.

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