Peter Lynch, famous Fidelity Investment head, noted:  The stock market follows earnings.    For this period of time, we have for sure witnessed this scenario.  We’ve had a substantial amount of “noise” this year and more to come as the midterm election season gains steam and all its policy debates and analyses.  We’ve had Middle-East goings on, AI and Data Center buildouts and backlash, other global geopolitical tensions, tariff threats and uncertainties,  elevated inflation and interest rates creeping upward, and an assortment of smaller morsels along the way. And yet, this market just keeps finding a way to forge ahead.  Corporate earnings remain resilient and strong.

The financial markets do have increased choppiness and, interestingly, the AI Tech stocks aren’t leading all stocks as before.  Magnificent 7 and AI leading companies have been taking a breather while OTHER parts of the market have more or less joined the party.  It has been an UP year for nearly all of the stock market.  I remember reading how few times the market has put together THREE consecutive years of double-digit returns on the upside.  We are now staring at the possibility of a FOURTH year of such – almost unheard of.

I will add that we have a long way to go to achieve that this year.  Mid-term election years are notoriously volatile periods of time and we have seen only a modest amount of volatility to-date.  Then tack on this August-October period of time that many times tends to find a way to rock things. 

With any past reading of my emails over the years, you would see that, while I love the conversations about markets and always have thoughts, I don’t generally have predictions for the short-term.  Short term market predictions are a fool’s game. What I DO attempt to do is evaluate the risk.  There now seems an elevated level of risk. . . .a litany of reasons for a market stumble and far fewer reasons things could cause it to continue higher and higher.  I’m not recommending a lot of “selling”, but I am being very careful about buying right now. 

I learned many years ago something we all share – I hate losing money.  Market fluctuations are normal and a PART of the process of investing for long term appreciation. We tolerate ups and downs in return for what has historically been a solid reward on the upside.  At the same time, I also evaluate the wisdom in continuing to chase a market at these levels.  We will keep to a close eye on downside risk. . . as we always do.

Fall is arriving.  I love all four seasons, but I particularly love the fall weather and the overlap of baseball playoffs with football season.  There is not much “news” every day and in every direction.  Remember to enjoy the SEASON ahead and keep your sanity in a world that can challenge us otherwise.  

We continue to be here for the meaningful conversations and relationships.  Keep keeping in touch.

With good regards,

Key