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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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Kerry base confirmed for Rás Mumhan

By Sean Moriarty Preliminary details of the Rás Mumhan have been announced by Cycling Munster. The four-day international cycle race will, once again, be based at the Riverisland Hotel in […]

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By Sean Moriarty

Preliminary details of the Rás Mumhan have been announced by Cycling Munster.

The four-day international cycle race will, once again, be based at the Riverisland Hotel in Castleisland and will run from Good Friday until Easter Monday.

The final route has not yet been revealed but it is expected to follow a similar path to the 2022 edition.

Last year, due to organisational difficulties, the Rás Mumhan committee asked local clubs to take charge of each day of the race.

Killarney Cycling Club hosted the Easter Saturday leg of the race, including managing the stage start in the town centre, the Category One mountain climb at Bealach Oisin Pass and the stage finish in Sneem.

“We are looking forward to seeing everyone at Easter and we wish all the riders the best of luck in their preparations for the event. Further details to follow as they are confirmed,” said Race Secretary Sinéad Moriarty.

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Showcasing Killarney to an influential audience

Kerry’s hospitality professionals turned out in style for the Skal President’s Dinner on Saturday night. It’s the social highlight of the year for professional tourism and travel organisations and it […]

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Kerry’s hospitality professionals turned out in style for the Skal President’s Dinner on Saturday night.

It’s the social highlight of the year for professional tourism and travel organisations and it was also a perfect opportunity to show the best of Killarney. Held in the Plaza Hotel, it was hosted by Kerry Skal President Michelle Rosney who used the occasion to highlight the best of Killarney’s performing arts talent, cuisine and locally produced drinks. There were special performances on the night by singers and dancers from St Brigid’s Presentation Secondary School and the West End House School of Arts who brought The Liberator, Daniel O’Connell, back to life for one night only to deliver a passionate dramatisation of a famous speech. Skal is the largest international hospitality networking organisation in the world with 13,000 members in 308 clubs in almost 90 countries. Fáilte Ireland Chairman Paul Carty said in his speech that the contribution Killarney has made to the Irish tourism industry should not be underestimated. He added that the tourism industry supports over 3,500 jobs in Killarney and over 7,000 in the rest of Kerry. He said the hard work put in by tourism professionals in Killarney over the years is paying off and when Fáilte Ireland surveyed hundreds of domestic and international tourists, at the height of the season last August, they couldn’t speak highly enough of their experience with 97 percent saying they were very satisfied. “The national figure is 90 percent so Killarney is actually seven percent higher than the national average and that’s truly exceptional,” he said. Over 55 percent of visitors to Killarney also spend time in other parts of Kerry and towns, like Dingle, Kenmare and Tralee, and really benefit from the spin-off.

INDUSTRY CHALLENGES

The Fáilte Ireland chairman said his organisation is acutely aware what Killarney has faced in recent years and the challenges it currently faces and every support possible will be provided to help.

Mr Carty said Fáilte Ireland last year launched a destination experience and development plan for Killarney and that will see the town reach its full potential through sustainability and the development of year-round tourist attractions.

He said costs were also a big concern with energy bills, in particular, going through the roof and putting businesses under serious pressure.

Staffing was another serious problem for the industry as so much talent was lost during the pandemic.

“An awful lot of great people left our industry and they’re not coming back, so there is a great shortage,” he said, adding that Fáilte Ireland was working hard to overcome the difficulties being experienced.

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