Equity markets rebounded as investors focused on the upcoming elections and anticipated Federal Reserve actions. Several market participants believe lower earnings projections, slowing employment, and some layoff announcements will encourage the Federal Reserve to modify its plans. The overall employment market is increasing, but high-profile companies such as Amazon, Apple, and Meta have slowed hiring trends or announced layoffs.
Incoming inflation data does not support a monetary policy change. We expect the Federal Reserve to continue raising interest rates and the upcoming U.S. election results to lead to political gridlock. The crucial positive catalyst for the equity market will be when the Federal Reserve starts to modify policy.
MCM Growth Strategy – Growth stocks underperformed value last month as Amazon had weaker than expected earnings and predicted a below-average Christmas season. Tesla also performed poorly as the CEO’s attention has turned towards his Twitter acquisition. A slowing ad market hit Alphabet and Meta Platforms. Bright spots included the energy holdings, Devon and Diamondback. Copart and NV5 global led the industrial sector, while non-cyclical companies like Costco, Monster Beverage, Eli Lilly, and Vertex Pharmaceuticals also performed well.
Purchases and Sails – We made no portfolio changes last month.
MCM Value Strategy – The energy and financial sectors remained strong. Caterpillar and Emcor rebounded on solid earnings reports and forecasts that exceeded investor expectations. Simon Properties reported solid mall traffic and improved performance measures at their properties. Consumer staples and healthcare companies took a breather after outperforming most of the year. A slight shift to economically sensitive companies drove most value stocks up last month.
Purchases and Sails – We sold Cisco Systems due to supply chain disruptions and China exposure.
MCM International Strategy – Similar to the U.S. markets, energy, industrial and financial holdings outperformed last month. BHP and commodity companies were relatively weak as China continues to shut down areas as their zero-tolerance Covid policy restricts economic activity. Technology remained weak as most semiconductor companies experienced slowing growth and increased inventories. Accenture also underperformed as a competitor announced slowing growth in its outsourcing business.
Purchases and Sails – We sold Hexagon to reduce the technology exposure. We adjusted our energy sector allocation by selling British Petroleum and using the proceeds to increase our positions in Woodside and Suncor.