In a surprisingly positive first half of 2023, Rana Chauhan discusses how unpredictable “events” can move the markets in ways we can never predict.
As Rana notes, the first half of 2023 surprised many investors after a winter of discontent. After many commentators predicted a difficult start for 2023, the markets posted a strong first half. The markets appear to be responding to what many are seeing as the evolution of artificial intelligence (AI) in the release of ChatGBT. What surprised investors was that the tool appears to work far better than many expected, potentially signaling a new era of technological advancement that may be on our doorstep that could rival the impact of the internet in its implications for society and economic growth. Accordingly, investors bought into technology stocks, and it was this development that was the primary driver of market growth in the first half. It would now seem everyone is excited by the prospects of AI.
Rana raises the example of ChatGBT and AI to point out one simple fact: there will be more surprises on the road ahead that will affect the markets, both positive and negative. For example, in the last year alone, we’ve experienced:
- A global spike in inflation,
- U.S. banking failures,
- Ongoing talk of a recession, and
- A debt ceiling standoff that could have done damage to the U.S. economy.
"...the inflation picture is starting to brighten because of continued interest rate increases, with many companies now having streamlined their operations to account for higher rates and are now stronger as a result."
Where Are We Now?
After a strong first half led by a few leading technology stocks, market leadership is now beginning to broaden with more companies returning to growth. Rana believes the markets have already priced in many of the challenges of higher interest rates and a mild recession. He feels the inflation picture is starting to brighten because of continued interest rate increases, with many companies now having streamlined their operations to account for higher rates and are now stronger as a result.
Rana is confident this is happening because we’ve seen this before in previous economic cycles. When the economic environment changes, the markets adapt and so do businesses and consumers. At the same time, our portfolio managers are looking for companies that innovate, increase productivity, and have demand for their products and services.
As an investor, what’s your best course of action?
Rana notes that there will be more surprises that will affect us, we just don’t know what they’ll be.
The best course of action then is sticking to your financial plan and allowing professional portfolio management teams to use their experience to navigate the markets on your behalf.
If you have questions or concerns, we invite you to discuss your current strategy with your Advisor.