Outlook & Ideas

2nd Quarter 2024

The market is off to a great start this year. The economy’s unexpected strength is more than offsetting the Federal Reserve not lowering interest rates as soon as investors were expecting. Still, the Fed still plans to lower rates at some point this year, assuming the inflation data continues to trend lower. That, and continued better than expected corporate earnings has encouraged investors to bid stocks higher (S & P 500 index 5,254, DJIA 39,807). While many high-flying technology stocks are overvalued, there are some sectors that have lagged (healthcare, renewable energy, mid-sized banks).

We like Pfizer (PFE, $27.75). It sports a safe 6% dividend yield. It has performed poorly since its Covid vaccine business has waned, but it is diversified with promising drugs in its pipeline. Consider Canadian Solar (CSIQ, $19.50). It operates worldwide and is valued at less than 33% of the average stock based on earnings, despite a solid outlook.

It was $45 as recently as last June. No dividend. Citigroup (C, $63) has soared since we mentioned it last quarter at $51. Other big banks e.g., J.P. Morgan and Bank of America have also done well recently, but other smaller banks not so much. We still like Truist Financial (TFC, $38), a mid-size bank that has moved up but still yields 5.5%.

The market is due for a “correction.” There are usually 3-5% selloffs each year and we have had none in the last year. Stock valuations are near record highs. We repeat what we said 3 months ago: “…Investors could be disappointed by unforeseen events: geo-political issues, a too strong economy that would keep interest rates higher for longer, and an election year that usually includes “grandstanding” candidates making wild promises about future policies.” Should we get a selloff, many stocks, including the above ones, would become even more attractive.

Market volatility should continue, which should make professionally researched stock selection imperative. If you are unwilling to closely monitor your portfolio that is more than $250,000, consider using our popular managed account service. The fee is quite competitive and is managed by advisors with over 90 years in combined market experience. For more information, please contact Bob Mann or Charles Harris.

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