To Inform:

Yesterday, The Joseph Group’s Chief Investment Officer Alex Durbin and I had the opportunity to attend the 8^th Annual Ohio Private Wealth Forum, put together by Markets Group. The event is a gathering of Investment Advisors and Fund Managers and an opportunity to share best ideas through panel discussions, topic roundtables, and one on one meetings.

I spoke on the opening panel titled “Asset Allocation and the Macro Economic Outlook.” I’ve actually spoken at all eight Markets Group Forums, I remember at the first event eight years ago, our panel was asked a question about whether a wine collection could be considered an appropriate alternative asset, I responded by saying having adequate liquidity is always important for an investment portfolio, which got a bunch of laughs in the room…for some reason they still invited me back!

Here is a sampling of notes through quotes I took throughout the day:

“I’m not bearish, I’m nervous.” Alex and I had the opportunity to meet with a manager who oversees one of the bond mutual funds in the Conservation strategy we have the privilege of managing for clients. In discussing his market views, he said to us, “I’m not bearish, I’m nervous.” I thought this quote perfectly captures the current mood of BOTH investors and clients. Current data is terrific – corporate earnings are solid, profit margins are close to record levels, the inflation rate is declining, employment reaccelerated last month, and credit conditions are the most benign in close to 20 years, BUT, investors are nervous. Politics and geo-politics likely have a lot to do with it…there is simply a disconnect between the positive data and negative mood. At The Joseph Group, we’ve been talking about this a lot and a word we have been in using in meetings is “anti-fragile.” We want things in the portfolio which have the ability to work regardless of what “surprises” may lie ahead.

“If you would have told me oil prices would be down one year after Israel was attacked, I would have said you were nuts.” Oil prices and energy stocks were a topic which came up in multiple panels with mixed views on the future direction. October 7 marked the 1-year anniversary of a heinous attack on Israel. On that day, crude oil was trading at approximately $82/barrel. Today, a little more than one year later, oil is trading at $75/barrel, and that after a rally from $68 where it was trading two weeks ago. The opinion on oil and energy stocks was widely mixed with some investors claiming the low prices suggest energy stocks are cheap, while others think the inability for oil to rally in the midst of Middle East turmoil suggests an overabundance of global supply.

Source: Yahoo Finance

“Leadership in the stock market should widen out going forward.” A widely held view across investors was looking forward, stock market leadership will no longer be constrained to a small group of technology stocks. Instead, other areas of the market including dividend paying companies, small companies, and industries outside of technology are cheaper and offer opportunities for investors. It’s worth noting we are already seeing signs of the “broadening out” in market leadership happening. On a year-to-date basis, performance of the S&P 500 is still skewed to the upside by a few large technology stocks, but over the last three months, the average stock has outperformed the S&P 500 index.

“The market may be too optimistic about rate cuts in 2025.” Based on data from CME Fed Watch, the upper band of the Fed Funds rate, which is currently 5.0%, is expected to fall to 3.5% by year end 2025, Doing the math, that’s six 0.25% rate cuts, The market was actually pricing in more rate cuts before last week’s strong jobs report, but even after backing off, many investors at the conference suggested we may not see as many cuts. Summarizing – solid growth, strong employment, sticky inflation, and potentially inflationary policies from both presidential candidates could mean rates may stay higher than investors currently think as we go into 2025.

Overall, the conference was terrific. For Alex and me, it was an opportunity to connect with old friends, meet new friends, and bring smart minds together to test the views behind the objective-based portfolios we have the privilege of managing for clients.

Written by Travis Upton, Partner and Chief Executive Officer