The first half of 2023 closed with the S&P 500 up 15.5%, half of which came in June, typically one of the worst months for stocks.
Big-cap tech rallied back, pushing the big indexes higher, while the broader markets sputtered. Bitcoin rose by 84% as well.
Artificial intelligence found its way into every earnings report.
And let’s not forget that the Fed holds a sledgehammer while politicians ramp up campaigning.
We know it’s hard to make sense of these seemingly disparate themes.
That’s why we’re taking insights from a few of our gurus to give you the top three themes for the second half of 2023.
And what they have to say will surprise you.
Jim Woods’ ‘Happy Gilmore’ Approach
There’s a scene in “Happy Gilmore” where Adam Sandler is paired up with Kevin Kneeland, which perfectly depicts this market.
Kneeland, the experienced pro, tells the young golfer, “Harness the good, block the bad.”
In the latest issue of Intelligence Report, Jim highlights the positive market sentiment built on inflation falling to a two-year low.
Yet, we haven’t felt the full impact of the Fed’s interest rate hikes.
Taken together, this implies that equities are overextended. However, markets can and do often run higher than most people realize.
If you look at the market gains, they’ve largely come off just a few large-cap tech stocks such as Apple, Amazon, Alphabet, Nvidia, etc.
The easiest way to see this is to compare the performances of the Nasdaq 100, the S&P 500 and the Russell 2000 year-to-date.
The top stocks account for roughly a third of the S&P 500 and half the Nasdaq 100.
Broader market measures like the S&P 500 Equal Weight Index (RSP) are actually down for the first half of the year.
We must be acutely aware of what built this market to know what could topple it.
The easiest way to do that is with Jim Woods’ Intelligence Report.
His premier monthly newsletter gives you all you need to navigate the markets at a macro level, highlighting the themes and trends critical to your portfolio.
And for those looking for more active participation, start your day with Jim Woods’ daily newsletter Eagle Eye Opener.
Mark Skousen Takes on the Fed
According to Jeff Hirsh at the Stock Traders’ Almanac, the year between the midterms and the next presidential election is typically bullish.
Is that possible, given all the headwinds, especially with the Fed fighting inflation?
Yes, and here’s why.
We know the Fed cares primarily about inflation right now. Chairman Powell and his team are willing to drive up interest rates to keep inflation in check and avoid an inflationary psychology taking hold.
This almost broke the banks in the first half of the year, as regional banks heavily invested in short-term treasuries were forced to sell at a loss when depositors fled.
A repeat in the second half of the year is very likely. However, the Fed has already shown a willingness to backstop the problems, keeping any catastrophic failure from spreading.
During Mark’s monthly Fast Money Alert Teleconference with his subscribers, an excellent question arose early on.
A member asked why we shouldn’t wait until the Fed stopped raising rates before entering the market.
If we did that, we’d be sitting on cash, which, even with inflation falling, still takes a big chunk out of its value.
The consensus view for the decade before the pandemic was simply “Don’t fight the Fed.”
But that may be breaking down now.
We’ve seen the large-cap tech stocks rally in the face of interest rate hikes as the rates climbed, with the Nasdaq 100 up over 40% year-to-date.
Technology is having its Roaring 20s moment because it’s so dynamic. Quite literally, it’s transforming society every day.
So… just maybe… bucking the bears makes sense right now.
That’s why Mark’s been smashing it with some of his Home Run Trader trades lately, taking advantage of the short-term opportunities created by the cautionary feeling that blankets the market.
You see, most folks only recognize the risks of the market collapse. But you have to remember that doing nothing also carries its own risks.
Bryan Perry Bucks the Bears
Earlier, we noted how just a few stocks continue to lead the market higher.
Bryan Perry thinks that might be changing.
As he noted in his Dividend Investing Weekly newsletter, while the “Magnificent Seven” mega-cap stocks are the most important, we’ve seen the broader S&P 500 companies and other indexes, like the small-caps and mid-caps, start to rally.
Plus, the Fed said 23 of the country’s largest banks passed annual stress tests.
All this comes despite expected rate hikes.
The Chicago Mercantile Exchange Group places the odds of a July rate hike at almost 90%.
With employment firmly entrenched, the Fed has no reason to curtail its interest rate hikes.
But what happens if inflation moderates, and unemployment remains strong?
Conceivably, that could lead to an era of high-interest rates that sit over the market for years.
It’s not likely that we will hold rates at 7% or some ridiculous level like we’re the Turkish economy. However, holding interest rates over 3% is a real possibility.
In the meantime, this leaves the market vulnerable to data-driven volatility.
Fortunately, Bryan’s Eight-Month Millionaire Program is designed to capture the most lucrative opportunities in this environment.
Picking the wrong stock that travels sideways for a year is worse than holding cash in the bank.
The BEST way to ensure inflation doesn’t eat into your portfolio is to maximize its potential.
With volatility here to stay, it’s not buy-and-hold that builds wealth but strategic action.
And that’s what the Eight-Month Millionaire Program is all about.
