It’s hard to imagine what we’ve been through as humans and as investors in the last five years. During this period, we endured a global pandemic, 9% inflation, the fastest rate hiking cycle in history, bank failures, and a self-inflicted global trade war. All of these ‘shocks’ I have written about in these publications, which is exactly why this concept was created – to give you a timely perspective when you need it most.

So, where are we at now? We got back to all time highs in a hurry. My guess was we’d see that sometime in the Fall barring any major catalyst that would prevent that, but earnings have hung in there well, trade deals have made progress as expected, inflation has remained relatively tame vs. expectations so far, and the labor market has remained resilient. With the market being the best discounting tool for the future, it is expecting more of the same through the end of the year. Another catalyst in this rally is the pricing-in of the Fed lowering their benchmark rate by 0.50%. Whether this influences the longer end of the curve where the 30-year mortgage rate is derived is yet to be seen, but that has also come down a bit, although still trading in a year + long range. It will take time and a larger move lower to establish a new trend downwards. Bonds, especially tax-free municipal bonds, continue to look attractive and offer an acceptable rate of return above the rate of inflation. Frankly I’d rather be here than in Treasurys to diversify away credit risk, at least until we get a better handle on the national debt or a realistic path to a balanced budget and debt reduction.

This rally seems to still be a widely ‘hated’ rally. I kind of hate it, too. So many questions and uncertainties around fiscal policy, rates, the economy, tariffs, etc. The market has done a remarkable job climbing a wall of worries. Bull markets tend to end on euphoria and start at the trough of despair. Lots of retail and institutional investors exited the market on the last drop we had, and many retail and even more institutions have not jumped back in yet. At some point, they’ll have no choice but to chase it if data holds together.

We were almost fully invested for clients at the beginning of the year and rode the market down, but remained steadfast in not panicking out of the market and what cash we did have was invested into the weakness. Analysts downgraded many great stocks to sell near the bottom of the last brief bear market this year, and are finally upgrading stocks at or near all time highs. Following analyst recommendations is a fool’s errand when it comes to timing. Markets, specifically tech, are overbought and due for a pullback. I expect those pullbacks to be bought. With 7 trillion dollars on the sidelines in cash and money funds, it is reasonable to assume that a portion of that will make it back into equities and bonds. When this market becomes extremely loved is a good chance to look at being more defensive. Barring any major unforeseen catalysts, we may be able to grind forward to a more ‘loved’ market and look at taking some money off the table at that point. The timing is this is extremely difficult to calculate and requires some luck and a lot of discipline.