Amidst the backdrop of two front-page, destabilizing wars as well as an alarmingly contentious Presidential election cycle, stocks resumed their positive momentum during the 3rd Quarter. Our stocks were up over 7% for the quarter, outperforming the broad market averages. Investor confidence was boosted by good earnings and the action of the Federal Reserve to reduce the Fed Funds rate by 50 basis points.
The resiliency of the U.S. economy, has generated predictions of a “soft landing.” In other words, no recession as interest rates come down and inflation is under control.
As to the election, we believe that neither party will sweep the White House and both Houses of Congress. The political rhetoric from both parties and their most extreme proposals will not be acted upon. Gridlock is favorable in this scenario.
A further reason for optimism is the substantial $7 trillion on the sidelines now sitting in short-term reserves. This money will find a more permanent home over time in stocks and long-duration bonds.
