In this episode of KanyeCast, Steve Rigali, Executive Managing Director with Kanye Anderson Rudnick, speaks with KAR’s Chief Investment Officer Doug Foreman. Foreman offers his thoughts on the state of the equity markets during Q2 2023 and his outlook for Q3 .
The Big Seven Rise as AI’s Influence Impacts the Market During Q2 2023
Foreman notes that equities performed well in Q2 2023, led by the “Big Seven” tech companies (Apple, Microsoft, Amazon, Meta, NVIDIA, Tesla, and Alphabet). Foreman explains these seven companies are positioned to benefit from the burgeoning growth in AI, which has been at the forefront of investors’ minds and “reached an inflection point” during the quarter.
Foreman emphasizes that these seven companies have the balance sheets and cash flow needed to capitalize on AI. Yet, a market where the Big Seven rise while other companies remain laggards is unsustainable. He expects the gap between the Big Seven and the larger market will close over time; however, for this to happen the yield curve must flatten out and resume its positive slope.
How Will AI Affect Investment Strategies?
Foreman believes AI may be the most important tech advance since the birth of the internet. In his view, wide-scale adoption of AI will grow over the next decade. Although the market currently holds the most benefit for the Big Seven, over the long-term, Foreman believes AI will affect almost every company on the market.
Slow, Steady Improvement for Q3 2023
Foreman’s market outlook for Q3 2023 is optimistic despite continued concerns about a possible recession. From his perspective, growth will be “flattish,” with flat to single-digit earnings. With COVID finally in the rear-view mirror, he believes the market should start seeing more normal demand patterns instead of the “boom-and-bust” rollercoaster of the last few years. The yield curve will eventually un-invert, while aggressive steps taken by the Fed will continue to slow inflation rates.
This information is being provided by Kayne Anderson Rudnick Investment Management, LLC (“KAR”) for illustrative purposes only. Information in this article is not intended by KAR to be interpreted as investment advice, a recommendation or solicitation to purchase securities, or a recommendation of a particular course of action and has not been updated since the date listed on the correspondence, and KAR does not undertake to update the information presented. This information is based on KAR’s opinions at the time of publication of this material and are subject to change based on market activity. There is no guarantee that any forecasts made will come to pass. KAR makes no warranty as to the accuracy or reliability of the information contained herein.
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