Kendall Dilley, CFA, CMT, offered his expert insights to Chuck Jaffe on his Money Life podcast regarding current bullish optimism and its sustainability in the second half of the year.
GDP strength, diminishing inflationary pressures, and the transformative impact of AI on investor confidence could mean indices are poised for possible new highs by year-end. Dilley underscores the possibility of market corrections in the second half of 2023 and their potential as buying opportunities. Yet, wild cards such as inflation, geopolitical tensions, and commercial real estate concerns could create market disruption. Still, the outlook remains bullish.
Enjoy this "Talking Technicals" Podcast Segment featuring Kendall Dilley. To listen to the full podcast, visit the Money Life with Chuck Jaffe website.
Optimism can quickly turn to euphoria when the market becomes bullish after enduring challenging bearish conditions like we experienced in 2022. Yet, we are heading into a seasonally tough time of year, and the S&P 500 in any given year sees an average correction of 13%. Still, Kendall expects that any correction could become a buying opportunity, with indices potentially hitting new highs before the end of the year.
Eight stocks accounted for 61% of the S&P 500's market gains in the first half of 2023, with tech and communication services leading the way. But markets are beginning to broaden with industrials, energy, and financial sectors performing well, allowing the tech stocks that led the market in the first half to consolidate and correct any overbought conditions.
Although technicals remain bullish, Fed rate hikes, overbought markets, and euphoric sentiment could all be potential signs of a pullback and increased probability of a correction. But Dilley expects any correction in the second half to represent a buying opportunity. Over the last ten months, we've seen a 27% gain in the S&P 500. Since 1929, the average bull market has seen a 114% gain over three years. Applying that to the current bull market takes the S&P 500 to 7500 by October 2025, giving this new bull market great potential upside.
Despite economic indicators pointing toward a recession going into 2023, GDP came in strong at 2.4% in the second quarter, inflationary pressures continue to de-escalate, and AI has significantly boosted investor confidence and bullish momentum. Still, Dilley lists inflation, Taiwan, and the commercial real estate crisis as potential wild cards that could create a market headwind.
Listen to the Full Podcast Here...
Host: Chuck Jaffe, Money Life with Chuck Jaffe.
Guest Contributor: Kendall Dilley, Vineyard Global Advisors Portfolio Manager CFA, CMT
*All Data sourced through Bloomberg.
