Week in Review: Negative Consumer Attitude Once A Again Leads A Market Recovery…

Week In Review – July 21, 2023

Negative Consumer Attitude Once A Again Leads A Market Recovery

This year’s market performance is more evidence that investor sentiment can turn on a dime. The history of bear markets and short-term corrections shows that markets can turn around when it’s least expected, especially when investors are most pessimistic.

This was true at the start of the year when few believed markets would ever recover, similar to how it was in April 2020, mid-2011, March 2009, October 1987, and so on. Each market downturn was driven by a real event such as a surge in inflation, the pandemic, the U.S. debt downgrade, the global financial crisis, or even Black Monday. However, in every case, investors expected these events to continue to worsen, even as fundamentals and valuations quietly improved resulting in strong returns one year later. While downturns are certainly painful, history shows that it’s often better to stay invested in an appropriately constructed portfolio.

While off the historical sentiment low of June 2022, consumer sentiment remains well below historical standards. This is important because two-thirds of the U.S. economy is driven by consumer spending. Stubbornly low consumer sentiment suggests a high level of uncertainty about the future remains in the mind of the consumer. As the Federal Reserve continues to tighten financial conditions to bring down inflation, and consumer sentiment remains tepid, risks for a slowdown in the economy remain, potentially curbing the recent market recovery. Consumer sentiment and Federal Reserve policy notwithstanding, the likelihood of a deep recession is arguably feared less than it was a year ago.

Important Disclosure:

The information contained herein is for informational purposes only, is not personalized investment advice and should not be construed as a recommendation to purchase or sell any particular security, sector or strategy to any individual person or entity. The decision to review or consider the purchase or sale of any security, sector or strategy mentioned should not be undertaken without consideration of your personal financial information, investment objectives and risk tolerance with your financial professional. Past performance should not be considered as an indicator of future results. Investment Advice offered through Pallas Capital Advisors LLC, a registered investment advisor.

CRN23_64

Mark-Bogar

Mark A. Bogar, CFA®, CAIA®
Chief Investment Officer
Pallas Capital Advisors

Stephen Kylander

Stephen Kylander
Senior Portfolio Manager
Pallas Capital Advisors

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The information contained herein is for informational purposes only, is not personalized investment advice and should not be construed as a recommendation to purchase or sell any particular security, sector or strategy to any individual person or entity. The decision to review or consider the purchase or sale of any security, sector or strategy mentioned should not be undertaken without consideration of your personal financial information, investment objectives and risk tolerance with your financial professional. Past performance should not be considered as an indicator of future results.

Investment Advice offered through Pallas Capital Advisors LLC, a registered investment advisor.

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