• Wealth Management Division

July Market Outlook

As always, before we build our perspective onto the upcoming month, we would like to reflect on last month’s market behavior. June appeared to be much less volatile and calm with respect to May’s market behavior. Early at the beginning of the month, numerous job and inflation reports had no significant impact on market performance and volatility measures. Although, we would like to admit that the new Fed sentiment took the market by surprise to a certain degree and significantly impacted fixed income products. However, the second half of the month remained somewhat quiet as a low summer trading activity starts to take over.

The most controversial and fairly unexpected event of this month was the outcome of the Fed meeting. As a result, investors and traders found out that the board is anticipating raising interest rates twice, by 0.25% each, in 2023. This news took markets by surprise, to say the least. Still, such a decision should be widely expected since we continue to see numerous signs of raising inflation levels and fast economic growth.

As a result, we continue to place our attention on the financial and energy sectors, which perform reasonably well in periods of higher interest rates and inflation. In terms of growth-oriented opportunities, we remain fairly optimistic but more cautious since raising interest rates will most likely negatively impact such stocks. Although, as long as we continue to see monetary support coming from the Fed, growth should drive the market. On the other side, the value becomes more and more attractive investment opportunity. We believe there are pockets in the market and certain sectors of the economy that present great value-oriented prospects for long-term driven investors.

In addition, we saw some short-term divergence in indexes this month, which is somewhat rare to see lately, as indexes continue to move in sync. We believe such a market behavior indicates a broad market reevaluation and rebalancing as investors start to grasp actual valuations and focus on current economic activity and its implications.

In terms of meme stock, we continue to observe in disbelief as some of them start to impact certain indexes and shape the market. Such market behavior is unprecedented and highly risky for long-term investors. Once again, we advise our clients to stay away from investing in meme stock since their value is not reasonable and the price is highly volatile.

Bitcoin and cryptocurrencies overall remain at the same level as after the significant drop in value in the second half of May. Though, we anticipate a shift of retail investors from the stock market to the crypto market once the meme stock frenzy is over, most likely later in the summer. Once the capital would start to shift, we will see a higher crypto valuation once again. Although cryptocurrencies remain relatively risky investments, we advise our clients to allocate a small portion of their portfolios to such products for diversification reasons, but with a great degree of caution.

The material on this page reflects PG Capital's professional opinions as of today and is subject to change. The information presented here has not taken into account any particular investor's investing goals or needs, and investors should not base their investment decisions entirely on this material. Past performance is not a guarantee of future results. All investments involve some amount of risk, and investors have different time horizons, goals, and risk tolerances, so consult with your PG Capital Financial Advisor before proceeding.

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