A Rewarding July 2023
Perimeter's average customer account was up 5.5% in July. This compares to a 3.11% change in the S&P 500 and a 3.36% change in the equal weighted S&P 500.
During July we both bought and sold technology. We did this with a number of small positions in well-known names and used the Russell 2000 and the Ark Innovation ETF to augment. Some of these ran pretty fast and hard and our risk model took us out of some. My desire to shift toward industrial stocks, being aware of tech’s hard run took us out of most of the rest.
Some of the reasons I like the industrial economy are:
During the last decade, large enterprises in the US have spent more on financial engineering than on real capital expansion.
Our government’s infrastructure support bill is just beginning to fund projects. We expect this funding will increase demand and thus enhance pricing power.
Many of these companies have developed software which differentiates their products and gives them pricing power over competition.
The economic backdrop is not as healthy as most think. I don’t think the Fed has decided to stop raising rates. While this is an uncertainty it is one of many we face. I am guessing that consensus believes we are nearly done and the economy is heading toward a “soft-landing.” While I am reluctant to forecast or describe a recession, a number of my own “leading indicators” (discussions of inventory, IT spending rearrangement, and out ever steepening and inverted yield curve) argue for recession.