Broker Check

Investor Call Recap

August 01, 2023

Thank you to everyone who was able to join us for our 3rd Investor Call of 2023. Our speaker, Mitch Tofte, from MFS Investment Managemen®, delivered a recap of the significant events in the market and the economy this year as well as some expectations for the future.

A few key takeaways from Mitch’s presentation include:

1.      When will the Federal Reserve stop raising rates and when might we see the Fed cut rates?

Interest rates (prior to the hikes in 2022) were historically low. While interest rates feel very high to us right now, relative to other points of time in history they aren’t; it just feels like it. In the end, the Fed would like to see interest rates around 3% and their inflation target is 2%. Mitch believes we will see two more interest rate hikes at the most and it is possible that we don’t have any more hikes. The market is pricing in interest rate cuts in 2024. The average period from the final rate hike to a rate cut is about 8 months. From there, the Fed might make modest cuts.

2.      What is the likelihood that the U.S. enter a recession?

This forecasted recession is not similar to the 2008 recession. If we do have one, it will be mild. Some have predicted that we would be in a recession now, but the strength of the US consumer has held up the economy. The strength of the US consumer is softening. It is possible that we could see a recession this fall, but more likely in the first or second quarter of 2024, if we see one at all.

3.      How should clients’ portfolios be positioned for a potential recession and recovery? (This response is not to be taken as investment recommendations)

Portfolios should be aligned to one’s financial goals and objectives and diversification is always great to keep in mind. A broad range of stocks with growth that is sustainable is better in the long run than volatile stocks with large, unsustainable growth. It makes sense to add a little bit of International exposure as well. Bonds are starting to look “beautiful” again. This means the 60/40 is not dead!

4.      CD rates look attractive, why should we invest?

Albert Einstein said compound interest is the eighth wonder of the world. This is why we should invest rather than buy CDs. Bond Yield to Worst (YTW) is the strongest it has been in decades and CDs are sold on bonds YTW. Bonds are also liquid. We believe CD rates have peaked and, historically, in the following 12 months after CD rates peak, bonds always made money. You don’t want to miss your opportunity by staying on the sidelines.

As always, if you have any questions or concerns, please don’t hesitate to reach out. Our next regularly scheduled Quarterly Investor Webinar will be on October 18th and will feature our strategic partners from Fidelity Investment Management.

Neither Mitch Tofte nor MFS is affiliated with Shelgren Financial Group or the Lincoln Investment family of companies. The views and opinions expressed herein are those of Mitch Tofte of MFS and may or may not represent the views of Lincoln Investment. These views are as of July 20, 2023, and are subject to change based on subsequent developments. The material presented is provided for informational purposes only. Information is based on sources believed to be reliable; however, their accuracy or completeness cannot be guaranteed. Nothing contained herein should be construed as a recommendation to buy or sell any securities. As with all investments, past performance is no guarantee of future results. No person or system can predict the market. All investments are subject to risk, including the risk of principal loss.

The views and opinions expressed herein are those of the author(s) noted and may or may not represent the views of Capital Analysts or Lincoln Investment. The material presented is provided for informational purposes only. Past performance is no guarantee of future results. No person or system can predict the market. There is no guarantee that any strategies discussed will result in a positive outcome. All investing involves risk and no investment strategy can guarantee a profit or protect against loss, including the potential loss of principal. S&P 500 Index is an index of 500 of the largest exchange-traded stocks in the US from a broad range of industries whose collective performance mirrors the overall stock market. The NASDAQ is an index that tracks the cumulative results on a market capitalization basis of all stocks trading in the NASDAQ system. The Dow Jones Industrial Average is a widely watched index of 30 American stocks thought to represent the pulse of the American economy and markets. Investors cannot invest directly in an index. Diversification does not guarantee a profit or protect against a loss.