Trisha's Thoughts

For quite a while now the investment markets have been focused on the fight against inflation and the potential economic impact of the Federal Reserve’s interest rate increases. While inflation has not yet returned to the Federal Reserve’s stated target of 2%, the recently announced June Consumer Price Index (CPI) showed that, in the US at least, inflation has fallen to 3% - which is quite an improvement from the peak of 9.1% last year.

As the Federal Reserve has been working to bring inflation under control investors have been grappling with what the broader economic impact would be. For most of the last year the majority of the commentary was focused on WHEN a recession would start and how severe it would be. With inflation trends continuing to move in the right direction and recent economic data continuing to be positive the narrative has begun to shift, with more and more discussions now centering around IF a recession will occur, rather than when. While we still don’t know the answer to that question, the fact that it is being asked has helped investors to feel more confident and that translated to continued investment strength in the second quarter of the year.

Not all stocks have benefited equally, however. As the copy of my recent newspaper column explains in more detail, a handful of mega-cap stocks have dominated so far this year, driven both by improving economic sentiment and a frenzy to invest in anything related to Artificial Intelligence. While some excitement may well be warranted, experience has taught me that remaining diversified, especially during periods of questionable exuberance in certain areas, is the prudent course.

As we review and rebalance portfolios this quarter we will be weighing both the potential for near-term volatility and the longer-term opportunities that we see. In all economic environments we believe in the importance of diversification, the value of a regular strategy of rebalancing and the contribution of income toward total return.  We continue to view cash, which is paying a competitive yield by historical standards, as a sensible piece of a diversified portfolio’s asset allocation, especially in accounts distributing income.

Please do not hesitate to call us if you have any questions or would like to discuss your account or the marketplace in general.  We are always happy to hear from you.

Trisha Arndt

Forward-looking statements are not guarantees of future performance and involve certain risks and uncertainties which are difficult to predict.  Past performance is not indicative of future results.  All indices are unmanaged, and investors cannot invest directly into an index.  Diversification does not ensure against market risk.