17 Aug 2022

Hello reader!

The stock market has rebounded since July, building up on the expectation of a fast-approaching end to rate hikes by the Federal Reserve (FED). At the September meeting of the FED, the market is placing a two-thirds probability for a 50 basis point increase, down from 75 basis points, and a likely end to rate increases by end of the year. While it may be a reasonable expectation if inflation readings continue to decline sharply, there remains significant uncertainty around the path that interest rates and inflation will take.

Over the past few weeks, small cap stocks have risen too and have arrived at a key technical level of 200-day moving average, just like the broader market. If the economy is heading into a material slowdown or recession in the US, then small cap stocks will face an uphill battle to deliver investment gains as the segment is more sensitive to any weakening in the domestic economy. There are a few industry groups, like biotechs, that can do well in a slow growth environment. At this time, no change to the model portfolio is being made.

The next monthly edition will be published on Sep 5. For any questions, kindly contact us at support@GraycellAdvisors.com.

Sincerely,
Graycell Advisors

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