HCM – Outlook for Q1 2024
The market is trading erratically to start the year, trying to find its footing after 2023. No real surprise, a period of consolidation is warranted and needed for the market to move higher. The markets are overbought, and until the froth is worked off, we expect a halt to progress for a short period of time. The HCM-BuyLine® is positive, and we are bullish, but we expect gains to be primarily made after the second quarter and into the later part of the year.
When will the Fed cut rates? Equity markets will get anxious about timing.
We reduced exposure to bonds early this year as the bond market started to turn over, and we have cash waiting for a bond trade to set up. Interest rates have climbed just a bit with some mixed news on inflation to start the year. We do expect the bond market to be very active this year, and we do see a lot of opportunity in this area.
CPI inflation surprised to the upside in December, largely driven by persistent shelter price growth. Services ex-energy and shelter inflation, or the super-core, Chair Powell’s preferred gauge of underlying price pressures, also picked up at year-end and continues to run at about double its pre-pandemic pace. While inflation has made great strides down from its peak in 2022, it ended 2023 well above the Fed’s target of 2.0%.
Given some upside risks from a rebound in existing home prices, tight labor markets, and geopolitical conflicts that may raise transportation costs and disrupt supply chains, the disinflation path ahead will likely be slower and choppier. This is not conducive to a Fed rate cut in March. We continue to expect the first cut to come in Q2, most likely in May.
The Consumer Price Index (CPI) increased 0.3% in December, the most in three months, and above the consensus of 0.2%. Energy and food prices were up 0.4% and 0.2%, respectively. Excluding energy and food, the core CPI also rose 0.3%, matching expectations.
Bottom line, while undoubtedly the outlook for markets is more positive this year than it was last year, we won’t allow that to breed a sense of complacency because as the past several years have shown, markets and the economy rarely behave according to Wall Street’s expectations. As such, while we are prepared for the positive outcome currently expected by investors, we are also focused on managing both risks and return. We understand the opportunities and risks facing both the markets and the economy, and we are committed to helping investors effectively navigate this challenging investment environment. Successful investing is a marathon, not a sprint.
Disclosure:
Investors should carefully consider the investment objectives, risks, charges, and expenses of Mutual Funds and ETFs. This and other important information about the Funds are contained in the prospectus, which can be obtained at www.howardcmfunds.com or by calling 770- 642-4902. The prospectus should be read carefully before investing. HCM Funds are distributed by Northern Lights Distributors, LLC, member FINRA/ SIPC. Northern Lights Distributors, LLC and Howard Capital Management, Inc. are not affiliated.
Howard Capital Management, Inc. (“HCM”) is registered with the SEC and only transacts business where it is properly registered or is otherwise exempt from registration. SEC registration does not constitute an endorsement of the firm by the Commission, nor does it indicate that the advisor has attained a particular level of skill or ability. Changes in investment strategies, contributions or withdrawals, and economic conditions may materially alter the performance of your portfolio. Different types of investments involve varying degrees of risk, and there can be no assurance that any specific investment or strategy will be suitable or profitable for an investor’s portfolio.
Mutual funds involve risk including possible loss of principal. When the Fund is out of the market and in cash or cash equivalents, there is a risk that the market will begin to rise rapidly and may cause the Fund to miss capturing the initial returns of changing market conditions. The mutual funds in which the Fund may invest may use leverage. Using leverage can magnify a mutual fund’s potential for gain or loss and therefore, amplify the effects of market volatility on a mutual fund’s share price. The Fund may be subject to the risk that its assets are invested in a particular sector or group of sectors in the economy and as a result, the value of the Fund may be adversely impacted by events or developments in a sector or group of sectors. The price of small or medium capitalization company stocks may be subject to more abrupt or erratic market movements than larger, more established companies or the market averages in general. A higher portfolio turnover will result in higher transactional and brokerage costs and may result in higher taxes when Fund shares are held in a taxable account. ETFs and mutual funds are subject to investment advisory and other expenses, which will be indirectly paid by the Fund. As a result, the cost of investing in the Fund will be higher than the cost of investing directly in other investment companies and may be higher than other mutual funds that invest directly in securities. The market value of ETF and mutual fund shares may differ from their net asset value. Each investment company and ETF is subject to specific risks, depending on the nature of the fund.
HCM-052324-097 | 3386-NLD-05/23/2024