I Can See Clearly Now

Recorded and released by Johnny Nash in 1972 on the album of the same name, the song "I can see clearly now" reached #1 on the Billboard Hot 100 and Cash Box charts. Johnny was heavily influenced by Bob Marley and his reggae style. The song only took two weeks to vault from #20 to #1 and stayed there for four weeks. After a long career in the music industry, Johnny died in October of 2020. I am also beginning to see more clearly the path forward for my investing future. The dark clouds of the pandemic and rapid increases in interest rates are largely behind us. There are definitely some obstacles to worry about like: the ongoing war in Ukraine, the alliances of Russia with China and North Korea, a trade war with China, and more bank failures. With that being said, there are some positives things going on also, like: the coming end to current interest rate hikes, broadening breadth in stocks, slowing inflation, record low unemployment, wage gains for working people, and nice risk-free returns on cash. I believe the positives outweigh the negatives and puts investors on a more secure footing. Back when Johnny recorded this song, most investors adhered to the maxim of the 60/40 portfolio. This means that 60% of your money was in stocks and 40 was in bonds. This is called a balanced approach to investing. When stocks are going down or sideways, the bond component of your portfolio would still yield steady returns. After the financial crisis of 2008, interest rates started on a path very close to zero in the U.S., making bond investments unwise from a yield perspective. But now it starts to make sense again with 5% plus risk-free returns on treasuries and some CD's. Plus if bonds make-up a part of the portfolio, there may be some capital gains in bonds due to declining interest rates. Over the past few months, stocks have been sluggish except for a handful of technology stocks which had an offering in the AI (Artificial Intelligence} space. These few stocks were tagged as the "Magnificent Seven". More recently, money has flowed out of these seven and into the broader market like industrials, energy, old tech, and leisure and travel. The valuations of the AI related issues just got too crazy for most investors so they cashed-out near the top and went bargain hunting for more reasonable P/E's like you find in small caps. Since I missed the AI mania in stocks like Nvidia and Taiwan Semi, I will be watching these highflyers drop and try to get some at lower prices. I believe the real long term benefit from Artificial Intelligence will come from increased effeciency and higher productivity in many businesses. The AI story is still in the first or second inning so there is no need to rush into it. Another reason to be optimistic is the current mission to on-shore more manufacturing due to supply chain issues with China. Many billions of dollars are being spent to bring high tech jobs to the U.S. in the name of national security. Just the build-out of these chip foundries will add to our GNP. The conversion to Electric Vehicles will also bring jobs and cleaner air to our cities. Clean energy like solar and wind are also in the build-out stage and will goose our economy. Infrastructure spending is also in full swing, I can't help but notice all the road construction everywhere I go. Material suppliers like Vulcan Materials and equipment makers and leasors will benefit from these trends. In conclusion, things are looking up. Even the IPO market is starting to come alive with several new issues just this week. In his lyrics, Johnny Nash sings "It's gonna be a bright, bright sunshiny day". I will second that notion.