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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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Massive increase in numbers using local bus services

Passenger numbers on local link buses across Kerry have increased by 1727% from 2020 to 2023 according to local Green Party Candidate for Killarney Diarmaid Griffin. This is the highest […]

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Passenger numbers on local link buses across Kerry have increased by 1727% from 2020 to 2023 according to local Green Party Candidate for Killarney Diarmaid Griffin.

This is the highest increase nationally and is due to the investment by the Department of Transport during this government term.

“This service was lacking in former times, especially in rural areas and is a welcome addition to the countryside and villages of Kerry.’ says Green Party Candidate for Killarney,” said Griffin.

“While in the past, a taxi was the only option for those not cycling or driving. Now a service to Killarney is available every Friday morning from my townland of Barleymount. This is just one example of the network of bus routes criss-crossing the county thanks to local link.”

“This project is a notable success as the figures show. Investment in public transport helps alleviate congestion, increases community cohesion and reduces rural isolation. This is all welcome news for the locality,”

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Two weeks to go to Killarney Musical Society’s production of ‘Michael Collins A Musical Drama’There is less than two weeks to show time for the cast of Killarney Musical Society’s production of ‘Michael Collins A Musical Drama’

Killarney Musical Society held its official launch on Sunday where cast members appeared in full costume ahead of the March 5 – 7 performance at the INEC Arena. The launch was […]

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Killarney Musical Society held its official launch on Sunday where cast members appeared in full costume ahead of the March 5 – 7 performance at the INEC Arena.

The launch was followed by a full rehearsal and director Oliver Hurley was also there to lend a hand.

“We were delighted to introduce our lead characters to you. We had Abbey Theatre players Brigid Delia and Michael, who are the narrators throughout the musical drama. Eamonn De Valera , Harry Boland, Joe Emmett, Arthur Griffith, Cathal Brugha, volunteers and of course the beautiful Kitty Kieran were in full costume,” said KMS PRO Linda O’Donoghue.

“Mother Ireland and her five graceful dancers were fabulous. Our director and choreographer Oliver, our musical director Michael Young and the full cast of 64 were there. The singing was powerful. The music in ‘Michael Collins – A Musical Drama’ is distinctly Irish. People will definitely enjoy it.”

TICKETS
Get your tickets in the INEC box office, online at universe.com or at the pop-up ticket office in the Laurel’s Pub, Market Cross from 12 pm to 4 pm between February 29 and March 2.

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