Quarterly Coordinates Q3 2023 Moving to the Next Stage

To view the full article: Click Here

To watch the replay: Click Here

Featuring: Lawrence V. Adam III, CFA, CIMA®, CFP® - Raymond James Chief Investment Officer

This year marks the 110th edition of the Tour de France, the most prestigious bicycle race in the world. The three-week 2,200+ mile route changes every year and starts in different countries. Like the Tour, economic and market cycles have different starting points, and no two are alike. The current economic cycle began with an historic pandemic and has been challenged by inflation, war, and unprecedented fiscal and monetary policy changes—factors that have at times exhausted investors. But while the course may change, the goal for cyclists and investors is constant: determine what stage of the race you are in, make adjustments when necessary, and maintain a long-term perspective. Chief Investment Officer Larry Adam mapped out the road ahead for interest rates, the labor market, and our favorite sectors.

1. Introduction │ Moving to the Next Stage

INSIGHT:No two routes of the Tour de France are alike, and the same can be said for market cycles. The current cycle has seen an historic pandemic, inflation, political tensions, and unprecedented policy activity

BOTTOM LINE We believe we are near the end of the Federal Reserve’s (Fed) tightening cycle, with upside in a soft landing but the nagging risk of a mild recession. Investors should be ready to adjust and maintain a long-term perspective.

2. Economy │ Fiscal & Monetary ‘Doping’ Is Wearing Off

INSIGHT: The US economy has avoided a recession, thanks in part to the ‘ effects of unparalleled fiscal and monetary stimulus - but that boost is now abating.

BOTTOMLINE:Dwindling excess savings, combined with credit tightening and job growth slowing, suggests the economy will slide into a mild recession beginning in the fourth quarter. Despite the slowdown, we expect 2023 GDP to be 1.3%.

3. Monetary Policy │ Fed Trying To Avoid Pile Up

INSIGHT: Every cyclist’s nightmare is a chain reaction crash, and the Fed is trying to avoid a pile up after its interest rate hikes.

BOTTOM LINE: The big question is how much patience the Fed must have to allow the disinflationary trend to continue before tightening further. Ultimately, we believe the Fed is in the latter stages of its tightening cycle.

4. Fixed Income │ Downhills Can Be Dangerous

INSIGHT: With Fed tightening nearing the end, inflation gearing down, and the economy no longer ‘pumped up’ by stimulus, Treasury yields are poised for a downhill glide.

BOTTOM LINE: In an environment where growth will be dicey, we prefer to play it safe and focus on high quality bonds, such as Treasurys, investment grade corporates and municipal bonds.

5. Equities │ Can Tech Sustain Its Breakaway?

INSIGHT: The leader of the equity pack has been the Technology sector, with a boost from AI But can its dominance keep pace?

BOTTOM LINE: The hoped for end of the Fed’s tightening cycle will provide a tailwind for equities broadly, with more defensive sectors (Health Care, Energy, Financials) poised to close the gap.

6. Asset Allocation │ Are You Ready For The Next Stage?

INSIGHT: This market cycle has been exhausting for many investors However, we feel we are entering the next stage of opportunity.

BOTTOM LINE: A balanced, well rounded, and consistent long term focused strategy is essential Focus on diversification and asset allocation to help get you across your finish line.