Page 3 - ISQ October 2022

INVESTMENT STRATEGY QUARTERLY

A hat trick of three factors could lead to a rebound in equities. First, favour both France and England, their precarious economic condi-
in the upcoming third quarter earnings season, better-than-feared tions lead us to pick the US when it comes to our preferred equity
earnings could spark a rally, as they did in the second quarter. region.
Second, inflation deceleration could halt further Fed rate hikes. The World Cup can be full of surprises—good and bad. Until infla-
Finally, midterm elections have historically had an impact them- tion abates and systemic central bank policy clarifies, market
selves, regardless of the outcome. In fact, in the last 19 midterm volatility is likely to continue. But to borrow a saying from Croatian
elections, the S&P 500 has been positive every time 12 months after soccer superstar Ivan Rakitic, “The smartest thing I did is I never
the elections (up, on average, ~14%). Even if a mild recession gave up.” Despite some of the setbacks we’ve experienced this year,
ensues, we should be beyond it by the end of next year and the we encourage investors to remain engaged and not watch from the
equity market tends to be forward-looking. That’s why we expect sidelines. Patience and sticking with your game plan can be critical
the S&P 500 to reach ~4,400 by year-end 2023. From a sector per- to success, and selectivity will be key. Diversification, asset alloca-
spective, there is no need for substitutions, as Energy, Health Care, tion, and a long-term mindset are timeless yet critical skills for any
and Financials remain our favourites. If you’re looking for a Best investor. And while this year’s performance in most major asset
Young Player to add value to your portfolio longer term, consider classes has been disappointing, everyone loves a comeback!
recruiting small-cap stocks.
The upcoming quarter will move quickly—from the changing col-
World Cup soccer pitches take a beating over the 28-day tourna- ours of autumn, through to winter and the football World Cup
ment, so selection of the type of grass is very important. Where before the holiday season beyond that. We wish you and your
does the seed for it come from? Surprisingly, the US! Just as US family health and prosperity in the final months of 2022.
seed provides the most resilient grass, the US economy and equity
markets retain their durable investment advantages. Consider
Europe, facing a huge penalty kick—an energy crisis as the coldest
months approach. There, policymakers are also juggling the need
for additional fiscal stimulus—the root of the recent inflationary Lawrence V. Adam, III, CFA, CIMA®, CFP®
surge—to help cash-strapped consumers while the European Cen- Chief Investment Officer
tral Bank Hikes interest rates to fight ongoing inflation. The
inflationary impact of the stronger dollar on European imports and
energy commodities priced in dollars only complicates the policy-
makers’ task. While the odds for winning this year’s World Cup

Investment Strategy Committee Members

Lawrence V. Adam, III, CFA, CIMA®, CFP® – Committee President, Nicholas Lacy, CFA Chief Portfolio Strategist, Asset Management Services
Chief Investment Officer
Joey Madere, CFA Senior Portfolio Analyst, Equity Portfolio & Technical Strategy
Eugenio J. Alemán, PhD Chief Economist, Raymond James
Tracey Manzi, CFA Senior Investment Strategist, Investment Strategy
Professor Jeremy Batstone-Carr European Strategist,
Raymond James Investment Services Ltd.* Ed Mills Managing Director, Washington Policy Analyst, Equity Research
James C. Camp, CFA Managing Director, Strategic Income, Pavel Molchanov Managing Director, Energy Analyst, Equity Research
Eagle Asset Management*
Doug Drabik Managing Director, Fixed Income Research Chief Investment Office
Giampiero Fuentes, CFP® Economist, Raymond James Anne B. Platt, AWMA®, AIF®, RICP® – Committee Chair, Vice President,
J. Michael Gibbs Managing Director, Equity Portfolio & Technical Strategy Investment Strategy
Nick Goetze Managing Director, Fixed Income Solutions Matthew Ziyadeh Investment Strategy Analyst, Investment Strategy

*An affiliate of Raymond James & Associates, Inc., and Raymond James Financial Services, Inc.
CFA® and Chartered Financial Analyst® are registered trademarks owned by CFA Institute.
Investments & Wealth Institute (The Institute) is the owner of the certification marks “CIMA” and “Certified Investment Management Analyst.” Use of CIMA and/or Certified Investment
TM
Management Analyst signifies that the user has successfully completed The Institute’s initial and ongoing credentialing requirements for investment management professionals.
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Certified Financial Planner Board of Standards Inc. owns the certification marks CFP®, Certified Financial Planner™ and federally registered CFP (with flame logo) in the US, which it awards
to individuals who successfully complete CFP Board’s initial and ongoing certification requirements.