Wall Street rallied hard in the first six months of 2023, taking many market analysts by surprise. With the first half of the year drawing to a close, investors are eyeing the second half and are positioning their portfolios.
But where does the market go from here? Jim Cramer, host of CNBC’s “Mad Money,” notes the rally this year was mostly among tech stocks, which began to lose momentum as June draws to a close.
“As we head into the second half of 2023, things look very murky,” Cramer wrote in an email to investors. “We seem to have a narrow market, the multi-trillion winners that have the strength to carry us forward, only to be gored by those left out and those with no real staying power, the endlessly failed insurrectional rotations that are always cheered by analysts and investors who want to see a broadening of the market.”
Other market watchers share Cramer’s assessment that the second half of the year could be hard to predict. But Ray Clark, global head of Market Research & Strategy at VectorVest, an analysis and trading platform, says there are three things to watch - corporate earnings, interest rates and inflation.
What to watch
“If we see solid corporate earnings come in the back half of the year along with a decrease in interest rates and inflation subsiding, it could create opportunity for investors but if one or more of these staggers, the market could be choppy,” Clark told ConsumerAffairs. “With the Fed’s efforts, it is likely that inflation and interest rates will cool down in the coming months but the big question will lie with what happens to earnings.”
Clark says that if companies can maintain strong earnings it could fuel a second-half rally.
Grant Edmunds, a certified financial planner at Compardo, Wienstroer, Conrad & Janes, says investors should closely watch the Federal Reserve.
“The prescriptive measures to tackle the inflationary hangover from COVID will take time to trickle its way through the economy,” he told us. “While we have seen inflation come down from its peak of over 9% to a more palatable 4%, additional unintended consequences may still come to bear.”
Should the economy begin to slow, Edmunds says that could be a factor to influence the Fed to not only stop raising interest rates but to consider cutting them – something the market would obviously welcome.
AI developments could boost tech stocks
Paul Wood, chief technology officer at COG, an organization giving investors a means to invest privately on the blockchain, expects the market to continue its rally in the second half with tech stocks continuing to lead.
“Companies like Microsoft and Oracle, which have shown strong performance, will continue to innovate and drive growth,” Wood told ConsumerAffairs. “Additionally, emerging tech sectors such as artificial intelligence and cloud computing will provide new investment opportunities.”
But what if interest rates continue to rise? Wood says they probably will but won’t derail the market.
“While this could create some headwinds for the market, I believe that the strength of corporate earnings and the robustness of the economy will be enough to offset the impact of higher rates,” Wood said, predicting the S&P 500 will end the year at a record high.
No one has a crystal ball so before making a major change to your portfolio, it’s always a good idea to discuss it with a trusted and objective adviser.
