Bulls Rest For Now
“While I’m excited as a citizen, I can’t help but express my growing concern as an investor. You see, in order for us to fix the fiscal challenges our country now faces, the time and pain it may require could be considerable.”
?I wrote this piece, “Enjoy the Exuberance,” in November of 2024 at?a time when the excitement was high and stocks were trading higher. Ironically, we received some negativity surrounding our caution but after 25 years, that rarely concerns me anymore.
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At the moment, there are quite a few passionate opinions on both sides of the aisle, so I’d like to refrain from any political opinions and simply focus on the market, which after 2 solid years is now facing its first significant pullback.
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NVIDIA, which at the time of this writing is now?down close to 27% from its high just a few weeks ago,?has been a strong leader on the way up and unfortunately is now leading the decline. It’s not too surprising to me to see this company experience such a pullback considering it has moved from a low of $10.80 at the end of 2022 to today’s print of $111.00. No, that’s not a typo.
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While I never like to downplay market weakness, since it is never fun to see losses, the fact of the matter is that markets will always oscillate, especially after a strong bullish run. This is precisely why we took the action we did as 2024 unfolded and remain cautious holding a Bond position as part of our equity allocation, something we have never done before.
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As I observe the markets, I am asking myself the following questions:
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While anything is possible, my general idea is that the tariffs and economic uncertainty we’re now experiencing becomes the catalyst for the FOMC to begin lowering rates once again. In my opinion, this decline in interest rates should be beneficial to stocks, especially to groups using a lot of debt. At the same time that we begin to see lower interest rates, my suspicion is we see a slowdown in the Tariff discussion as deals are negotiated and economic peace talks transpire.
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In summary, while I have larger economic concerns for our country, I don’t believe that recent weakness to be the end of the bull run but rather a healthy reset to remind everyone that equities continue to bear risk and should be treated respectfully and with caution.
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Having taken steps to reduce our equity exposure ahead of this decline, places us in the drivers’ seat for re-entering when opportunities arise. We will not be too quick to recommit but make no mistake we’re definitely looking far and wide with prices becoming more attractive by the day.
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Until next time
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~ Quint
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