“I’m at a place called Vertigo (¿Dónde está?)”
U2 – ‘Vertigo,’ 2004
For all of us music fans, I personally listen to more music than watch professional sports, you’ll likely know ‘Vertigo’ from U2’s 2004 album titled “How to Dismantle an Atomic Bomb”. Well saying that quarter two was like dismantling an atomic bomb is a tad of a stretch, it certainly was not boring. As we wrote in our second quarter insights, we are living in a world of uncertainty with anxiety at heightened levels and an environment that feels like vertigo. During the quarter, we witnessed unprecedented tariffs being issued on countries around the world and the short-term effects we experienced were as close to a crash that we have seen since the early days of COVID. The equity markets experienced a waterfall type correction; U.S. government bonds sold off dramatically and volatility increase substantially. The markets were experiencing an enormous amount of uncertainty, stress, and heightened risk. Then it all reversed, like a roller coaster that dropped from ten stories high and powered back up. For now, the markets seem calm, but under the surface there are some concerns that might bring about some more heightened volatility, a possible white-knuckle moment in the months to come. So, without going into too much technical jargon, the key to investing as stated by former Raymond James legend and Chief Equity Strategist Jeffrey Saut are two rules. Rule #1: Do not lose money. Rule # 2: Do not forget Rule #1. Invest according to your plan and time horizons as set forth by your financial advisor, do not jump on and off the roller coaster and let your team at Banyan Wealth do what we do best. As it is summer and I personally need to get out of my office on this Fourth of July weekend, since my wife is going to kill me, we are going to keep this insight noticeably short.
Pros and Cons:
Pros:
- June payroll report was strong, the U.S. unemployment rate fell to 4.1% for the month
- AI boom continues in Q2
- Inflation is moderating. The U.S. Consumer Price Index, measuring month over month, has been weaker than expected for the last four months.
- Forward earnings estimates are rising
- Geopolitics and the chaos in the Middle East have eased
- Potential tariff clarity by August 1st
Cons:
- Rising trend in debt-to-GDP
- $9 trillion dollars that the U.S. government needs to refinance over the next 12 months
- Frothy valuations/overbought conditions
- A concerned consumer
- Tariff uncertainty
- Volatility
Conclusion
Have a healthy, fun, and safe summer.