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“August is a horrible month for the stock market and the reason I know this is that it has interrupted almost every one of my summer vacations for the last twenty years.” A quote from a New York investment manager on Friday.  

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A lowering demand in the purchasing manufacturer’s index and a weaker expectation in employment report have rekindled recession fears in the US. However, it is more than likely we are seeing a pause in the economic recovery and that disappointing earnings expectations within the technology sector simply sets the bar back to more achievable levels.

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Has the rise in valuations of the Magnificent 7 that dominate the technology sector got ahead of itself? As Ben Rogoff of Polar Capital Technology Trust states in their recent company report, AI monetisation is a key risk if the timeline disappoints and if early productivity gains prove limited. He believes valuations appear extended, but not unreasonable based on the vast opportunities that he is convinced AI will deliver.

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Bill Ackman of Pershing Square Holdings PLC said what many of us believe, that Central banks were too slow to lift rates in the first place and have been too slow in reducing them now. Earlier in the year markets anticipated more rate cuts than materialised, but they may well come now.  

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The benefits of active management means that one is not forced to be overweight in just a few companies. Opportunities abound in all sorts of companies around the world.  Any weakness in equities will be offset by gains in bonds and alternatives. Diversification is key to reduce volatility but, for those looking for the greatest returns, volatility is just part of the journey.

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Comments from EXE Capital Management collating the thoughts of managers available through EXE investment strategies.

The views are those of the author only. The above does not constitute a recommendation to buy or sell. The value of investments can fall as well as rise.

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