“We can still eat the good half.” When I was a boy, I didn’t love peeling potatoes. One time, I showed my Poppy the bad spots on the potato I was peeling, hoping I could toss it. But he said to cut off the bad because we can still eat the good half. He appreciated a good half. Thinking about the markets so far this year makes me appreciate the good half too.
As I chart a course for the accounts I manage for the rest of the year, I find it helpful to review the first six months of 2023. It’s probably fair to say the outcome has been a bit better-than-expected for both stock and bond markets, especially compared to 2022’s volatility.
Here are the major points we learned through the year’s first half.
- Inflation doesn’t just go up. The return to normal supply/demand and business expenses easing a little are both helping push the inflation rate down—which has helped both stock and bond markets bounce back.
- Consumer spending continues to be strong and continued low unemployment has helped the US avoid a recession…so far. The Federal Reserve continued to raise interest rates during the first half and will probably do so again but may begin lowering them as early as the end of 2023.
- Bonds look like bonds again. After a weak 2022, bonds are back and should be considered an important part of a balanced portfolio.
The rest of the year looks like a mixed bag. We’ve seen improvement in the bond market, and I believe there are still plenty of opportunities for growth and income—assuming both inflation and interest rates continue to move lower, as expected. The bond market could offer opportunities for the first time in over 15 years.
Stocks have already had some nice gains for the year. With a mild recession still a potential, I plan to be less aggressive in the second half of this year than I was in the first half. This doesn’t mean stocks cannot go up from here, but I see the risk/reward in stocks and bonds to be evenly balanced.
Overall, the opportunities in the year’s second half may not be as strong as in the first half, but I still believe there are investment opportunities to be had. The American economy is resilient.
I didn’t mind peeling potatoes once I convinced myself it was just like whittling. Some of the best potatoes I’ve ever eaten were peeled with my Poppy on the river bank and then fried with fresh fish. I don’t know if it was the cast iron skillet, the grease, or the ambiance of the gravel bar, but he was right. The good half really was that good.
Have a blessed week!
Fervent Wealth Management is a financial management and services entity in Springfield, Missouri.
Dr. Richard Baker, AIF®, is the founder and executive wealth advisor at Fervent Wealth Management.
Securities and advisory services offered through LPL Financial, a registered investment advisor, Member FINRA/SIPC.
Opinions voiced above are for general information only & not intended as specific advice or recommendations for any person. All performance cited is historical & is no guarantee of future results.
The economic forecast outlined in this material may not develop as predicted & there can be no guarantee that strategies promoted will be successful.
