Cetera Financial Group’s Post

Transcript

Hey, I'm Gene Goldman. Here's a look at the week ahead for the week of July 22nd. Well, last week U.S. stocks as measured by the S&P 500 fell 1.97%. This index has worst week since April 19th. Overall, this index has fallen about 3% from its peak. So with the S&P 500 still up about 15.4% this year, this is just a very small pullback. But the sell off feels larger because the brunt of the sell off has been focused on those stocks that have been leading this market higher, this year's growth and technology companies. So this week, let's discuss two things, the causes of this market pullback and #2 why we remain optimistic that though we might see a correction, that's where stocks fall 10% from peak to troth. We feel it will be very short lived. So why the pullback? There's a few reasons why, but the three key reasons, number one, overall profit taking as you see here. At one point, the S&P 500 has had a huge rally, up 37% since the last correction low on October 27th of last year. This is a very big rally in a very short time. The market was due for some profit taking #2 There's concerns about the technology sector. There are reports that the US is considering some trade restrictions as part of a crackdown on Chinese semiconductor companies. This adds to overall uncertainty on the tech sector. And #3 the tech sector has also had a huge run. And what size the Fed is cutting rates, possibly as early as September. Investors are rotating away from technology into more economically sensitive sectors. And these are the sectors that benefit from lower interest rates. So despite the recent weakness, there are reasons to be optimistic that any correction could be and should be short lived. Number one, we don't see a nasty bear market. A bear market is when stocks fall 20% from their peak to trough. Usually for a bear market you need a recession. And we don't see a recession. The economy looks pretty good. For example, this week on Thursday, we get second quarter GDP estimate, the coming at 1.9%. Number 2 is that the Fed is likely cutting interest rates again as possibly as early as September. Lower rates decreases borrowing costs. This is good for the market. And #3 we're seeing why they're market breadth. So without going into details about what market breadth is, just think about this way. More stocks are advancing than declining. And this is a sign of a very underlying healthy market. So the big take away this week is that US equities. Had their worst week since April 19th. They were due for a pullback and the trigger is profit taking, especially in the tech sector. This is a normal part of investing. We believe the fundamentals are intact. So even if we have a correction again, they average about once per year. We feel very short lived because the underlying positive market and economic fundamentals are intact. Thank you for listening. For more information, please follow us on X Esoteric. I am and see you next week and thank you so much.