Carson Group Chief Market Strategist Ryan Detrick expects the U.S. stock market to reach all-time highs by the end of 2023 and remains bullish on the economy, despite the recent pullback in stocks and ongoing recession concerns from others.
Prospects for a possible government shutdown and an auto workers' strike don't cloud Carson Group's outlook either.
"We've been overweight equities all year, we've seen better times coming, and we don't think that's going to change," Detrick told ThinkAdvisor in an interview Wednesday.
"We think this recent lull in August and September is simply the market catching its breath after one of the best starts to a year for equities." The Nasdaq index experienced its best first six months ever, and the S&P 500 saw its best first seven months since 1997, he noted.
"We're quite optimistic that we can still make new all-time highs … before this year is over with a strong fourth quarter for equities led by an economy that continues to surprise, with a strong labor force and strong consumption and improving manufacturing," he said.
Carson has been stressing to its financial advisors daily that a little third-quarter pause is "perfectly normal," he added. "We've been saying for a month now, 'This is normal. Don't get too worked up,' we've had about a 5% correction on the S&P back in August, now we're just chopping around, again, perfectly normal."
That doesn't mean there aren't economic trends the firm is watching closely, including the U.S. dollar's nine-week rise, which could be a worrisone sign for investors. A strong dollar historically signals risk-off times, Detrick said, adding, "if the dollar continues to strengthen, that's one thing that could upset things." For now, the market seems to be taking it in stride, he said.
Detrick outlined several reasons for his upbeat view.
Rate Hikes Likely Done
Carson doesn't expect the Federal Reserve to implement another rate hike after raising interest rates 11 times this cycle.
"We think the Fed is done hiking" and will leave rates where they are for a while, maybe into the second quarter next year, Detrick said.
"There's really no need in our opinion for any more hikes when we see shelter and autos putting a lid on inflation."
Advisors express concern that the Fed will push the economy to the brink of recession to break inflation, but Carson Group doesn't expect that to happen, Detrick said.
On Wednesday afternoon, the Federal Open Market Committee left its benchmark interest rate unchanged but signaled one more hike in 2023.
Inflation Probably Waning
Commodity prices, notably energy, are high, which raises inflation concerns, but autos and shelter comprise about 60% of core inflation in the Consumer Price Index, and they're falling, Detrick said.
"Is inflation going to come roaring back later this year, early into next year, and could that upset the apple cart and continue to open the door for the Fed to continue to aggressively hike interest rates?" he asked. "That's one worry. … We don't anticipate that but that's one worry."
