May 30, 2023: Assuming the debt ceiling FUBAR fades into the rearview mirror, the Treasury will have to rebuild the cash reserves it exhausted during the long period of “special measures.” This cash rebuilding process involves bond sales which will also be good for inflation because it will compete for excess money in the economy. Unfortunately, it will also and create an alternative to buying stocks for a time.

During the second half of this year the stock market should begin a recovery. Watch for tech stocks, consumer discretionary stocks, and small cap stocks to begin a rally first. Hopefully, you have bought some stocks and funds cheap and can hang on for the bounce. The bounce, in turn, could become another long lasting bull market.

Of course, we still have to worry about the Fed and interest rate hikes, but those should be winding down towards little or nothing. Throughout the rate hikes, the labor market has remained relatively strong as has consumer spending. Even though GDP has remained positive, consumer expectations are quite negative. If this leads to reduced spending, a mild recession can be expected because consumer expenditures comprise about 70% of aggregate demand. On the other hand, an additional reason to be optimistic at this point is that stock markets tend to begin rallies prior to the bottoming of a recession.

Some growth oriented stocks to consider include: KBAL, IDCC, PNNT, GPK, DBX, META, TIM, NTCT, DY, GRBK, MSTR, DBX, and BCSF. Dividend and growth (including dividend growth) can be obtained from the likes of: MDC, PNNT, SBGI, APAM, SUN, TIM, TSCDY, UPBD, IIPR, and ETD. During the last 3 months, the top ETFs were: IGV, PSJ, XLY, KSW, and WCLD. Not surprisingly, these ETFs are already pointing towards the potential in the tech and consumer discretionary sectors.

The light at the end of a long and gloomy tunnel lies ahead. Good investing!