Confidence Amidst Uncertainty

By Tim Hoyle

“A range of uncertainties, both old and new, complicate our task of balancing the risk of tightening monetary policy too much against the risk of tightening too little,” Federal Reserve Chairman Jerome Powell at the Economic Club of New York. Thursday, October 19th, 2023

Jay Powell’s remarks in a Bloomberg interview last week at the Economic Club of New York sent the markets on a roller coaster ride. During this volatile ride, the 10-year Treasury Yield touched 5% for the first time in 16 years before closing out the week at 4.93%. Meanwhile, the S&P 500 ended the week down by 3%. According to Bloomberg’s analysis[1], Powell’s remarks:

1. Could be deemed both hawkish and dovish, especially during the Q&A portion.
2. Stated inflation is still too high and it’s too soon to be confident it’s returning to the Fed’s 2% target.
3. Provided an optimistic take on the labor market and highlighted the recent moderation in wage growth.
4. Signaled a pause at the next FOMC meeting ending November 1st.
5. Set the bar fairly high for a move in December but kept his options open.
6. Noted that higher long-term yields could mean less need for the Fed to hike rates.

As Chairman Powell stated in Thursday’s remarks and we wrote about last month, there are many uncertainties. One thing I am certain of: there will always be many uncertainties. Haverford endeavors to provide the clarity, expert advice, and pragmatic optimism our clients need to navigate the markets in an uncertain world. While it would be imprudent to state certainty in much else, the average stock currently trades at a mid-teens earnings per share multiples and has experienced no price appreciation during the past two years. This has resulted in many high quality, dividend paying companies trading at attractive prices, which leads us to confidently, if not certainly state:

1. Equity investors with multi-year time horizons should be adding to their holdings in great companies that are currently trading at attractive multiples, especially in the Consumer Staples, Health Care, and Industrials sectors.
2. The Phillies hardly ever win easy and regardless of the outcome of the NLCS and hopefully World Series, they will always put fans through an emotional roller coaster.

Given these near certainties, Haverford’s approach to growing and preserving wealth should be well positioned to generate the long-term results our clients need to meet their financial goals.

[1] Fed’s Powell Speaks About Economy, Rates at ECNY: Live Updates, Analysis – Bloomberg