When will markets bottom - Part 2

Musings: Beachman's updated forecast for the next 4 quarters

Just about one month ago, I first published my quarterly forecast which included an opinion on when markets would bottom.

A lot has happened since then, however not much has changed in my roadmap (see below). This weekend, I reviewed this 4-quarter timeline and tweaked just one little thing in the Q3 2022 column. Kudos to the reader who spots the solitary change.

To be clear, I am not trying to predict whether we will have a recession or if the Fed is behind the curve or the degree of any impending economic slowdown. I track a variety of economic indicators and trends with the sole aim of trying to understand when certain sectors and markets will bottom and how I could profit from these events.

The question that I am hyper-focused on is…

When I should be making buys and sells in my comeback portfolio?

Ying and Yang markets

Growth stocks have risen some, however investor interest remains tepid…because we are not completely sure what to expect in the upcoming Q2 earnings reports.

Commodity prices have started dropping, but not enough to reduce inflation to levels where consumers feel good about filling up their gas tanks or going to the grocery store. (I was elated to find $3.66/gallon gas yesterday while on a road trip)

Supply chains have eased a bit, however certain goods and services remain in tight supply.

Labor markets remain strong, yet are showing small cracks in terms of increasing layoffs, higher jobless claims and rising labor unrest.

The FOMC is on track to raise interest rates this week, followed by a two-month break, however markets are divided on whether a 0.75% raise is good or if we need to rip the bandaid off with a 1% raise.

Mortgage applications have tanked due to higher interest rates and homebuilders are hurting, however real estate prices remain high while buyer interest has cooled off.

Crypto prices have recovered a bit, but nervous nellies are not sure if this is due to speculative trading and that the crypto winter is not truly done.

Bottomline

My expectations and best “guesstimates” remain unchanged. You can read my detailed reasoning behind each of these points here.

• I expect growth stocks to likely start bottoming in late Q3.

• Broader macro conditions could start improving in late Q4/early Q1.

• Corporate share buybacks will continue to stay strong.

• Institutional buying will start ramping up in Q3.

• Consumer sentiment will stay depressed through the next 2-3 quarters.

• Global markets are still a bit of a question mark, however I did make some specific plans for my international holdings.

I will continue to update this roadmap and post it regularly, especially if there are major changes. This exercise brings together the science of financial data and the art of investing forecasting.

All or some of these events might never come to fruition. However, I am not willing to sit on my hands waiting for the market to give me lagging signals. I want to be able to react quickly as things play out and having such a timetable with actionable choices is my preferred approach.

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