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Expectations need to be managed

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By Michael O’Connor

Three weeks of negative market numbers have ensured the positive rally we experienced to mid-August is now but a distant memory.

The assumption that the improving inflation figures we saw in early August would allow the Fed to take their foot off the gas pushed markets higher, but these notions were swiftly put to bed by the Fed, killing the market momentum in the process.

Instead, investors are now gripped by fears of the aggressive policy tightening to come.

So, where does that leave us?

In short, it leaves us in the most prolonged bear market since the Great Financial Crisis.

I have spoken about this before, but it bears repeating. The unbridled support that fuelled previous recoveries is no more. The rescue team that saved us from the burning building in recent years has now turned against us.

Like some sort of arson-obsessed firefighter, the Fed has turned to the dark side, seeking lower prices, lower valuations and more subdued economic activity in an effort to tame inflation.

As such, the probability of a fast recovery fades dramatically.

Investors got used to spending a lot of time near all-time highs over the last decade, but the landscape is changing.

The S&P 500 has not been within 5% of its all-time high for the past 95 days, the longest period since 2013.

The Nasdaq 100 has now spent 33 weeks below its 40-week moving average, the longest period on record.

There is no denying the downtrend we are in and waiting around for the cavalry to arrive is no longer a justifiable investment plan.

Slower growth is still growth, but expectations need to be managed.

Just as painful

Markets are never defined as good or bad - they are judged merely as better or worse.

What has already happened holds far less weight than what’s about to happen.

With market conditions worsening, the fact that they are retreating from an unsustainable level of success bears little significance for investors suffering through the pain in real-time.

For example, a 7% drop in property prices would undoubtedly be met with resounding disdain from property owners despite house prices jumping 40% in the past 18 months.

Before the most recent real estate rally, investors would have bitten your hand off for a 30% increase in their property value in under two years, but you can never view the two in isolation.

Psychologically, the previous unrealised gains have already been locked in. Who wants 30% when 40% was just on the table? The pain of loss has now been anchored to the new highs.

Nothing else will do

More importantly, it’s never how far something has fallen but the uncertainty around how further it could fall that gnaws at the mind of investors.

So, while a reprieve from some of the most supportive market conditions in history may seem reasonable, investors will undoubtedly feel every bit of the pain along the way, regardless of the good times they experience to get here.

The short-term adjustments are never easy, but the long-term trend rewards those willing to take the pain.

Market outlook

For now, I expect markets to continue to move sideways in the absence of a significant catalyst. A return to a sustainable bull market is unlikely until we see a stabilisation in interest rates.

Inflation and labour market figures continue to be the ones to watch.

For free weekly stock tips and direct access to my personal investment portfolio, go to www.theislandinvestor.com.

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Artists invited to showcase work at Wine and Art night

It’s back – and not before time – the hugely popular Killarney Rotary Club evening of Wine and Art will return this November. The pandemic enforced its absence and now […]

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It’s back – and not before time – the hugely popular Killarney Rotary Club evening of Wine and Art will return this November.

The pandemic enforced its absence and now every effort is being made to make up for lost time.

Widely regarded as one of the social highlights of the year in Killarney, this year’s gathering will take place in the Great Southern Killarney on Wednesday, November 30, commencing at 7.15pm.

Tickets, which will be available at the door, are priced at €20 and all proceeds raised on the night will go to deserving local charities and community organisations.

Over the years the evening of wine and art has raised tens of thousands of Euro for great causes and the 2022 proceeds will be of enormous benefit to the chosen groups.

This year, once again, the event is being held in association with Daly’s SuperValu and supported by Killarney Brewing and Distilling Company.

Rotary Club President, Rayla Tadjimatova, has appealed to all artists who might like to showcase their work on the night to get in touch with club members, as soon as possible, to guarantee inclusion.

“We are reaching out not only to artists who have supported the event in the past but to any new artists who wish to take the opportunity to place their work in front of a very appreciative local audience of up to one thousand people on the night,” she said.

Those interested should email killarneyrotaryclub@gmail.com as soon as possible.

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Gardai seek whereabouts of missing Kerry teen

Gardaí are asking the public for their help in locating a 15-year-old teenager. Nicolas O’Sullivan has been missing from Ballyvelly, Tralee, since Monday (October 3). He is described as being […]

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Gardaí are asking the public for their help in locating a 15-year-old teenager.

Nicolas O’Sullivan has been missing from Ballyvelly, Tralee, since Monday (October 3).

He is described as being approximately 6ft in height, of a slim build with brown hair and green eyes. When last seen Nicolas was wearing grey tracksuit bottoms and a black hoody top. He was also carrying a black bag.

Anyone with information on Nicolas’ whereabouts is asked to contact Tralee Garda Station on 066 710 2300, the Garda Confidential Line on 1800 666 111, or any Garda Station.

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