2023 Mid Year Market Review & Outlook

Welcome to the mid-year review of 2023—a year that has unfolded largely as expected, aligning closely with the timeless wisdom of Sir John Templeton's market stages. As we delve into the outlook for the remaining months, we will examine the market through three lenses: ?the market, the economy, and the sentiment. I appreciate your continued readership, and I encourage you to share your thoughts as we navigate the twists and turns of this eventful year.

Market Segment:

As we approach the second half of 2023, the investment outlook remains bullish, supported by the historical phenomenon known as the "midterm miracle." The nine months starting from October 1st of a midterm election year, including the period ending in the middle of 2023, have consistently been profitable for the stock market. The introduction of gridlock in Congress during midterm elections reduces political risk aversion, instilling confidence in investors and reducing the fear of potential legislative actions impacting the market.

The current bull market has been marked by a focus on big-cap and growth-led stocks, particularly in high-quality mega tech growth and large luxury goods producers, mainly in Europe. The prevailing skepticism about the economy's growth prospects has led investors to seek companies that can grow even in a low-growth environment. As a result, these sectors have performed Ill and are expected to continue leading the market through the rest of 2023.

It's not uncommon for the stocks that were hit the hardest during a bear market to bounce back swiftly..

Traditionally, small-cap stocks tend to lead in bull markets. It's likely that we'll witness this phenomenon later this year, although it may not be the hot topic of conversation at that time. Currently, this shift hasn't occurred due to the challenges faced by the certain sectors that have large weighting in smaller cap stocks

Economy Segment:

America's economy shows better-than-feared fundamentals, as indicated by recent economic data. The GDP growth rate for Q2 2023 was reported at 2.4% annualized, and while this attracted significant attention, other granular indicators also point positively. Notably, business investment in equipment has rebounded significantly, suggesting that businesses are overcoming price pressures and expanding their activities.

Additionally, there are positive signs in the housing sector, with pending home sales inching higher in June, snapping a three-month losing streak. New home sales, despite a decline from June, remain robust, and the supply of new homes for sale has decreased. This indicates the potential for further growth in the construction sector.

Sentiment Segment:

The market sentiment has warmed from last year's pessimism, although some skepticism and recession expectations persist. However, the positive economic data supports the rationality of investor sentiment. The market is forward-looking, and current earnings results are unlikely to have a lasting impact on stock direction. Investors are gradually overcoming their fear surrounding earnings results, and the market's positive response to economic data indicates growing confidence.

In discussing market recoveries, Historical facts show that recoveries have been much longer and stronger than downturns. Although, bear markets can be challenging, history demonstrates that they are relatively short compared to the powerful and enduring bull market recoveries. Recoveries have often been sharp and rapid following steep downturns, with returns averaging more than 18% over five years after the 18 biggest market declines since the Great Depression.

Moreover, some of the world's leading companies are born during market recoveries, highlighting the resilience of strong businesses during tough economic periods. Investors should avoid common mistakes such as trying to time the markets, focusing too much on negative headlines, and being influenced by short-term market fluctuations. Instead, a long-term perspective, diversification, and avoiding attempts to time the market can lead to better investment outcomes.

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Actions to Consider in Portfolios:

Investors should conduct a portfolio checkup to ensure that their asset allocation is in line with their long-term goals. Shifting assets from stocks and bonds to cash in volatile markets may lead to misalignment, and a diversified portfolio can better Weather market fluctuations.

In the bond portfolio, upgrading the core, selectively pursuing enhanced income, and considering short-term bonds can provide resilience during market volatility and offer stronger income potential than cash alternatives.

Expanding horizons and considering global or international exposure can enable investors to benefit from the growth potential of companies in different industries and markets, not just within the U.S. Over the years, many top-performing stocks have come from companies based outside the U.S.

By adopting a long-term perspective, avoiding common mistakes, and taking appropriate actions in portfolios, investors can navigate the market's ups and downs with confidence and capitalize on potential opportunities in the bullish market for the rest of 2023.

Thank you for being part of the journey, and I look forward to continuing to provide you with valuable insights.

Warm regards,

Mate

P.S. Remember, this is not investment advice, and I encourage you to conduct your due diligence and evaluate your current financial situation.