Similar to July, markets are starting to react to a potential Fed pivot and rallied hard earlier this week. An eventual pivot paired with extremely negative sentiment, retail investors throwing in the towel, valuations getting back to normal and a significant drop in rates following the Bank of England’s about face and you get a …
October 5, 2022 – Two huge up days in a row put bulls back in charge. Is this the market bottom? Only time will tell. It will largely depend on the severity of the pending economic downturn. But retreating interest rates, and weaking labor market statistics suggest the end to the Fed’s cycle of higher interest rates is nearing an end. That is at least one key ingredient to the end of a market downturn.
For those of you who have read my letters over the years, you should know about my 2-day rule. It states that two consecutive days of outsized moves in the opposite direction of recent market trends marks a reversal. Certainly, the gains Monday and yesterday qualify as strong up sessions in sharp contrast to the …
October 3, 2022 – Interest rates may finally have reached a level that can be labeled restrictive. The 10-Year Treasury yield touched 4% last week. It may not have to rise much further. The next piece of the puzzle to end the bear market is for earnings expectations to align with an outlook for a flat to moderately weak economy next year. That process will play out through the coming earnings season and possibly extend through year end. Depending on where earnings bottom, the range for the S&P 500 near term would likely be 3200-3600. We are at the top end of that range today. The good news is that months from now investors will be looking past the abyss to more optimistic times.
Stocks fell sharply once again on Friday bringing an end to a miserable month, quarter and year-to-date. Interest rates continued to rise sharply until Wednesday when the Bank of England announced it would intervene to support the pound. That helped to support stock prices for exactly one day. By Thursday stocks were back in steep …
September 30, 2022 – The bear remains in control. Although the Bank of England offered hope that central banks would slow down the pace of tightening, that proved to be short lived. Jobs data in the U.S. was robust; too much so. This led to another risk-off day with all 11 sectors finishing in the red. Recent volatility is picking up steam. Fed officials should take note, but will they?
A one-day respite from an exploding bond market was welcome and overdue news. However, yesterday stocks gave back all of the 2% gains seen following the Bank of England’s surprising announcement on Wednesday. The BOE’s intention to restart purchasing 10-year Gilts helped drive interest rates substantially lower. Over the pond, they saw their 10-year bond …
September 28, 2022 – The story is simple. Bond yields keep rising and stocks keep falling. Overnight the Bank of England said it would start to buy long-duration bonds to try and stem the tide. That won’t work. The good news is that long bonds now have a real cost, about 1.5% according to TIPS spreads. They don’t have to go much higher to slow the economy. Witness housing that keys off of long rates as do stock prices. Interest rate policy is starting to impact the real economy. As both GDP and inflation slow, the day the pressure can be relieved gets closer, and so does the end of the bear market. But in bear markets, the short-term pain is always worst at the end. Weak hands capitulate and sell. Long term investors find bargains.
Stocks fell for the fifth straight session as bond yields continue to rise. Overnight the yield on the 10-year Treasury reached 4.0% but backed off about 10 basis points after the Bank of England announced it would temporarily buy long dated bonds in an attempt to stop the rapid decline in the value of the …
September 26, 2022 – One might think that the sharp rise in interest rates is crushing our economy. So far, that isn’t true, except for housing. It will take further increases in rates to reduce inflationary pressures. That has been the message of the Fed. Markets are finally reacting. Rates today are about neutral. By year end, they will be starting to squeeze growth. Markets have discounted a lot of this. Perhaps there is further 10% to the downside based on an expectation of a soft landing or mild recession and interest rates staying within the bounds suggested by Fed policy.
Last week was another miserable week for equities. Stocks are now once again challenging their June lows. Some averages have already broken through on the downside. The NASDAQ has fallen more than 10% in just two weeks. The Fed sent the market into a downward motion with Chairman Powell’s harsh and hawkish comments at Jackson …
September 23, 2022 – Another Fed meeting comes and goes. Markets are finally starting to believe what Chairman Powell and his team have been saying for weeks. Interest rates are going to be higher for longer. More pain is coming. Job losses are going to increase. Home prices need to come down. Inflation is the only focus today. It is not all bad news though, especially for long-term thinkers. A lot of upcoming negative headlines are being priced in.
It is quite clear that Chairman Powell regrets his slightly dovish comments at July’s meeting which helped drive a 25% Nasdaq rally. Since then, every Fed official has been pounding the table leading up to his Jackson Hole brief speech where he basically said getting inflation back towards 2% is more important than jobs, stocks, …
September 21, 2022 – Today concludes the 2-day FOMC meeting. The key for investors is Jerome Powell’s post-meeting commentary. Lately, he has talked of enduring some economic pain to bring inflation down. How much pain? The Fed will whip inflation. The question on investors’ minds is the extent of the collateral damage. Powell’s view will set the tone until Q3 earnings season begins in about three weeks.
Today concludes an important 2-day FOMC meeting. The Fed is almost certain to increase the Fed Funds rate by at least 75 basis points. There are a few pundits suggesting a full percentage point is possible in the wake of last week’s surging August CPI report, but the Fed never intends to surprise. A one …
September 19, 2022 – The Fed believes it is at the neutral rate of interest now. By Wednesday afternoon, it will be well above. Tightening will now begin in earnest. The odds of recession have increased. Longer term, once the Fed returns to neutral, rates should revert to levels that give owners of bonds real returns plus a risk premium. That probably suggests levels not far from where rates are today.
Stocks closed lower on Friday and fell below key technical support levels. Concerns continue to rise that a soft landing cannot be averted. Despite that, the FOMC meeting this week that concludes on Wednesday is likely to result in another increase in the Fed Funds rate to 3.00-3.25%. With two more meetings to come this …
September 16, 2022 – Major averages are testing critical support levels following another rough day for Tech stocks. Inflation continues to confound the Fed, which could result in the ultimate policy error…raising rates and tightening liquidity into an impending recession. Earnings updates from FedEx and Adobe are not helping matters at all.
Mega-cap stocks took it on the chin again yesterday following an unimpressive profit update from Adobe#, an historical stalwart in the software industry. Anyone who has ever opened a .pdf file knows how widespread Adobe’s product lineup extends. The disappointing update helped drag down other large-cap software safe havens and anything tied to the high …
September 14, 2022 – A surprisingly bad August consumer price report jolted markets yesterday. The 4% loss wiped out gains of the previous week built on optimism that inflation was coming down quickly. It took years to build up. Inflation isn’t going to suddenly disappear. Yesterday’s report virtually ensures that the FOMC will raise rates another 75 basis points next week and probably raises the ceiling for Fed Funds this cycle to a number approaching 5%.
Stocks fell 4% yesterday after a shockingly bad report for consumer prices in August. It was the worst day for stocks in over two years. The August increase in core prices (ex-food and energy) of 0.6% was twice expectations and virtually assured that the Fed would increase interest rates at least 75-basis points for the …
September 12, 2022 – If you listen to the Fed, you could be convinced that it will keep maximum pressure on the economy all the way into 2024. If you listen to markets, the Fed will start to release pressure by the second half of next year. Judging from recent inflationary trends, we would agree with the market’s assessment.
Stocks rose again on Friday for the third straight session. Futures point to further gains this morning. Since mid-May the S&P 500 has traded within roughly 300 points on either side of 4000. Will the next breakout be up or down out of that range? That’s the question that is uppermost in investors’ minds. Let’s …
September 9, 2022 – Market pundits continue to debate if June marked the lows for this bear phase. Following a 25% bounce the Nasdaq dropped seven straight days before rallying the past two. Tougher Fed Speak, rising interest rates and collapsing profit margins are serious headwinds. Valuations are becoming somewhat attractive but our Fed is looking at backward, lagging indicators and will keep pressing the needle
After seven straight negative days, the Nasdaq finally bounced higher on Wednesday with a substantial rally. Oversold conditions were ripe, but paired with falling energy prices and moderation in Treasury yields led to a risk-on rally. The small-cap index led the way with a 2.2% advance and held important support levels. The S&P was up …
September 7, 2022 – Interest rates have skyrocketed since Jerome Powell’s Jackson Hole speech. The yield curve flattened at first as recession fears rose, then steepened as the Fed began to accelerate the rolloff of its balance sheet. Stocks reacted accordingly. The question now is where do we go from here? When the Fed was buying securities and suppressing rates, stocks rose. If there is good news, the next Fed Funds rate increase may be the last, possibly as large as 50-75 basis points.
Stocks continue to fall as interest rates continue to rise. Short-term rate increases are a direct result of the Federal Reserve’s policy to steadily raise the Fed Funds rate. Another increase of 50-75 basis points is expected in two weeks. At least 50 basis points are already priced into sub-one year Treasury issues. Longer-term bond …
September 2, 2022 – Another tough week for stocks and bonds as the market digests aggressive tightening commentary from Fed officials over the past few weeks. Growth stocks took it on the chin yesterday, spurred by China lockdowns and a fresh round of Government actions restricting critical component exports to the country. Defensive stocks outperformed but are getting very pricey.
Rates spiked higher yet again, leading to another risk-off day and week. The 10-year Treasury interest rate peaked in mid-June at 3.48% before falling to 2.53% in August. This helped propel a solid run for stocks, led by growth and a Nasdaq return of 24%. Since then, interest rates have spiked higher and stocks resumed …
August 31, 2022 – Stocks continue to fall amid increased fears that Fed tightening will lead to a recession. The inverted Treasury yield curve suggests the same. Markets are now discounting flat earnings next year, probably down in the first half, followed by a second half recovery. While further downside to the June lows or below is possible, it is unlikely that the Fed will keep monetary pressure on once a recession starts and employment levels fall. This isn’t a time to panic.
Stocks continued their slide which began moments after Fed Chairman Jerome Powell spoke at Jackson Hole last Friday. All told, the leading averages fell about 5% since the speech, where Powell reiterated the Fed’s focus to continue to keep short-term interest rates elevated until there is convincing evidence that inflation is receding toward its 2% …
August 29, 2022 – On Friday, Fed Chair Jerome Powell, reiterated and punctuated his stance that the Fed’s focus at the moment was to defeat inflation and keep it close to target for the foreseeable future. That could require some short-term economic pain. Nothing in his message represented any change of policy, but it did spoil the party for some optimists that the pain had already been endured.
Stocks fell sharply on Friday immediately after Federal Reserve Chairman Jerome Powell gave his highly anticipated speech. While stock prices took a big hit, bonds showed very little change, although yields are up a few more basis points this morning. The 2-10 Treasury spread steepened by less than 1 basis point before giving back that …
August 26, 2022 – Markets continued to consolidate the ~20% spike off June’s low with minor rebounds the past few days. In anticipation of Chairman Powell’s long-awaited speech at Jackson Hole today, stocks are priced for a somewhat hawkish update. Anything that deviates from that position could release energy in either direction. Other news items require some attention as well that could affect GDP going forward.
Stocks staged a late day rally to help bring all 11 S&P sectors to a positive close yesterday. Gains were led by Basic Materials, Technology, and Communication stocks. The risk-on tone had defensive sectors lag the overall market with Utilities, Consumer Staples and Health Care stocks fractionally higher. Rallies continue to follow the Treasury market. …
August 24, 2022 – Markets await Jerome Powell’s speech tomorrow with apprehension. He is likely to say little that investors don’t already know. He will take on a hawkish tone saying the Fed’s job of reducing inflation is nowhere near completion, but that it can’t say when tightening will end because data is still too sparse to make any such prediction. Given little other news to chew on, investors could do nothing or they could overreact. Whichever, the impact will fade quickly. Investors must wait for data confirming enough slack for the Fed to stop the tightening process.
Stocks drifted lower yesterday after two consecutive declines of more than 1%. My 2-day rule says a counter trend move of more than 1% for two consecutive days changes us, at least for the short term, from bullish to cautious. Market apprehension precedes the start of a two-day Federal Reserve conference in Jackson Hole, where …
August 22, 2022 – All inflation isn’t the same. Some is quite transitory. The up and down impact created by short-term factors accentuated the pace of price increases this Spring and is beginning to unwind now. Structural inflation problems take longer to solve, which is why the market’s optimism that the Fed can begin to cut rates early next year is most likely misplaced. The Fed will spell that message out this week at its Jackson Hole meeting.
Stocks fell on Friday as the Federal Reserve conference in Jackson Hole is set to begin later this week. For quite some time, investors have gotten increasingly optimistic that the Fed would finish raising rates close to the end of 2022 and begin to cut rates before mid-2023. Fed officials last week tried to squelch …
August 19, 2022 – Earnings season is over. Fed meeting minutes came out Wednesday afternoon. Inflation and jobs reports for July have come and gone. The rest of August is a slow, vacation-themed month. All eyes will be on the Fed’s Jackson Hole meeting starting next Thursday. Following a 22% Nasdaq growth-led rally, questions remain.
It has been a relatively tame week, with indices basically flat, but a few things could start to add volatility back into markets. Today is options expiration, with ~$2 trillion in derivatives set to expire, and $1 trillion of that in S&P 500-linked contracts alone. That, along with low volume on exchanges during a heavy …
August 17, 2022 – Bulls say the Fed starts to cut rates in the second quarter of 2023. Bears say it will start significantly later. Who’s right? Now the bulls seem to have the upper hand. Fed officials at Jackson Hole will vote with the bears. Which side will investors believe? The answer will dictate where markets head over the next several months.
Stocks were mixed yesterday. The Dow rose as components Home Depot# and Walmart both reported earnings that impressed investors, but both the NASDAQ and S&P 500 lost ground. Bond yields rose. Tech stocks were the biggest losers, coincident with the rise in rates. August is often a month with little hard economic news. The largest …
August 15, 2022 – With stocks now having recovered half of the decline from record highs, it is hard to find many bargains. Growth over the next several years is likely to be anemic. Corporate success, therefore, will be largely a factor of the abilities of individual companies to grow in a flat environment. These times will clearly separate the wheat from the chaff.
Stocks rose for the fourth straight week and have now almost precisely recovered half of the losses since late last year. Does that mean the bear market is over? Was it even a bear market? Or was it a mid-course correction within a long-term bull market that traces its birth to the end of the …
August 12, 2022 – Finally, some significant movement with respect to inflation data that is clearly turning the corner and quickly. This is but one month’s worth of declines, but forward indicators continue to point towards inflation having peaked. After a 20%+ Nasdaq bounce in just two months, how much meat is left on the bone?
In a classic case of “the market knows more than you,” the recent strength in growth stocks and weakness in interest rates led to a whopper of a reporting week from an inflation standpoint. Since the middle of June, we have been witnessing incredible strength in the most beaten down areas, along with growth stocks …
August 10, 2022 – This morning’s headline CPI numbers were lower than expected igniting a rally, but shelter costs continue to rise strongly. Last Friday’s employment report shows wages rising well over 5% annualized. The Fed still has a lot of work to do. It’s encouraging that inflation forces may be starting to ebb, but one favorable CPI report isn’t going to change the Fed’s strategy, at least not for now.
Stocks gave up ground yesterday in a quiet session in front of today’s scheduled CPI report. Some of the more speculative NASDAQ stocks that had experienced sharp rebounds since the June lows led to declines. Semiconductor stocks, in particular, were hit hard after earnings warnings from Nvidia and Micron. This morning’s calming CPI report will …
August 8, 2022 – The Deficit Reduction bill does absolutely nothing to reduce inflation, at least not over the next few years. What it does do is institute a wealth tax by taxing stock repurchases made with funds that have already been taxed at least once. A 1% tax on repurchases may sound inconsequential, but don’t believe Congress will stop at 1% once the first tax is implemented. It’s a tax consumers and shareholders never see directly, therefore the most palatable to Congress, But not to shareholders.
Stocks were volatile with little change last week after a super strong July. Friday’s surprisingly strong employment elicited greater reaction in the bond market than the stock market. Good employment numbers are almost always good news for markets. After all, they signal a strong economy (despite two consecutive down GDP quarters!), but perhaps too strong …
August 5, 2022 – As markets consolidate a massive spike off June lows, we reassess what the future holds. Bearish news in June was followed by incremental positives in July. Earnings are still advancing, inflation is peaking, and valuations have normalized. The Fed and inflation remain wild cards but the worst is likely behind us unless incoming data is much worse than expected. Jobs take center stage this morning.
Stocks consolidated yesterday and for much of this week. Following a 14% bounce higher in the S&P and a 17% pop in the growthier Nasdaq over a 5-week period, this is to be expected. Resistance levels are approaching where sellers typically emerge. While earnings are a bit better than expected, forward guidance is, at best, …
August 3, 2022 – Markets fell in fear of Chinese retaliation to Speaker Pelosi’s trip to Taiwan, but reactions to political surprises tend to be short-lived. The focus quickly should return to the economy and inflation. While Fed officials try to speak in a more hawkish tone, their crystal balls are rarely clearer than that of the average investor. The path of economic decline (if any) and inflation will dictate how the market goes from here. The good news is that inflation has peaked allowing the Fed to take some pressure off the brakes in coming months. When it stops, markets will celebrate. In fact, they should start to celebrate before the Fed Funds rate peaks.
Stocks fell more than 1% as global tensions rose coinciding with Speaker Pelosi’s visit to Taiwan. So far, the Chinese response has been measured but that could change at any moment. In addition, Federal Reserve officials have been trying to convince investors that the rather dovish conclusion reached last week after Chairman Powell’s press conference …
August 1, 2022 – The worst month of the year (June) was followed by the best month in two years. What changed? Market reaction to generally mediocre earnings reports suggests markets had caught up with a decelerating economic picture. Furthermore, markets now see the Fed decelerating its pace of future interest rate increases with cuts beginning next year. That may prove right, but can the Fed succeed with unemployment below 4%? We will learn that answer over the coming months.
Stocks rose again Friday capping the strongest month for equities since April 2020 as the country was in Covid-19 lockdown. Coincidentally, June was the worst month this year, just as March was the worst month in 2020. Bottoms form a V-shape. The V bottom in 2020 was more classic; this one has been more ragged. …
July 29, 2022 – While the Fed follows their script dictated by market conditions, Chairman Powell offered hope that rate hikes going forward won’t be as strong as the 200bps implemented in the past three months. Markets extended their rally following his speech and followed through yesterday. With the Fed not meeting until September, earnings take center stage.
Another Fed meeting yielded another aggressive bounce for stocks on Wednesday, following a slew of earnings reports that helped recoup recent losses. Chairman Powell and the team recognize that a slowdown is already upon us. GDP has now been negative for two straight quarters, an often-used metric that determines if we are in a recession. …
July 27, 2022 – The FOMC meeting today will tack on another 75 basis points to the Fed Funds rate. Starting in July, it is clear that inflation is starting to ebb, but we don’t yet know how far or how fast. The pace will guide Fed policy going forward. It will take a hawkish stance today, still aiming to bring Fed Funds to 3% or higher by the end of this year. Markets are starting to look to next year. Might growth reaccelerate in 2023? It’s much too early to call. This week’s earnings reports suggest that much of the impact of economic deceleration is already priced into stocks.
Stocks fell across the board yesterday as fears of recession rose. Bond yields fell. Today marks the conclusion of the Fed’s FOMC two-day July meeting. Anything but a 75-basis point increase in the Fed Funds rate would shock investors. The Fed doesn’t like to shock investors, but like all FOMC meetings, the actual rate decision …
July 25, 2022 – Weak growth from Snap and Twitter reminded us on Friday that there is still downside during this earnings season, but as we enter the biggest week for reports, futures point up again this morning. Wednesday’s FOMC meeting will most likely reinforce the Fed’s intent to get rates up to 3%+ quickly. Whether that will be enough to slow the economy to the point where inflation expectations can be grounded below 3% is still open to debate.
A sloppy Friday followed three strong sessions last week. Interest rates fell. Stocks were impacted by weak earnings from Snap and a poor revenue report from Twitter that raised fears that Internet advertising growth rates may be slowing more than expected. While last week was the first full week of earnings reports, this week is …
July 22, 2022 – Markets continued their summer rally, with growth stocks and battered high- flying Covid favorites leading the way. A lot of bad news has already been priced in. Stock reactions to negative news are more important than what happened to earnings in April. So far, the bulls are in charge as we start the second half of the year.
Nearly 20% of S&P 500 companies have now reported earnings. From a top line perspective, results have been good, not great. Many are lowering overall guidance, but with most of the downside stemming from a strong U.S. Dollar, not end market conditions. Nearly 40% of market-weighted sales are internationally sourced. When those revenues are converted …
July 20, 2022 – The early signs emanating from earnings season is that markets may have correctly sized earnings expectations looking forward. It’s still early but the market reaction to date is encouraging. The real seed for this rally may have been set last week when the Fed took a 100-basis point rate increase for next week’s Fed meeting off the table. For the first time in months, the Fed and the market seem in synch.
Stocks soared for the second day in a row. Two back-to-back up days resets the playing field positively. That doesn’t mean you have to buy today, but it does put the offense on the field for the first time in months. Just to review, one up day of note within a bear market may be …
July 18, 2022 – Stocks surged on Friday holding early gains throughout the session. They look to open higher again this morning as the odds that the Fed will increase the Federal Funds rate by 100 basis points next week fade. Earnings season gets going in earnest this week and next. Have expectations been reset enough? The answer to that question will tell us how close we are to a market bottom.
Stocks staged a sharp rally on Friday after some earnings disappointments sent stocks lower on Thursday. Economic news was generally positive led by a stronger than expected retail sales report for June. With that said, in most cases, the impact of higher prices suggested Americans were spending more dollars but on fewer goods. That is …
July 15, 2022 – Another hotter than expected inflation report puts the Fed in an even tougher spot. Does backward looking data create even more aggressive tightening? Or do recent commodity price collapses, lower job postings, higher unemployment claims, rising home inventories and a bear market in stocks mean they should be looking forward? Is a recession already priced in?
Markets don’t normally move or overly react to monthly CPI reports. That is, until Covid hit global economies, leading governments and central banks around the world to print money hand over fist. Demand for goods and services rose while supply chains collapsed. Now we’re left with old policy tools attempting to fix undesired side effects. …
July 13, 2022 – Earnings season is beginning. Look for lowered expectations. The question is how much has already been priced in? The telltale sign will be when a company’s stock no longer declines on bad news. So far, we haven’t seen much of that.
Stocks gave up some of their recent gains yesterday despite a sharp drop in oil prices. Today’s highly anticipated CPI report for June will not reflect the sharp drop in commodity prices of the last several weeks. Nonetheless, it will be closely watched for any indication that inflation is receding. However, the bigger focus for …
July 11, 2022 – Stocks look to open this morning lower as Covid concerns rise again in China, Britain deals with finding a new Prime Minister, and Germany tries to set itself up for a cold winter. There is a lot of data coming in July. The key for equity investors will be the forward-looking statements of corporate managements as they report second quarter earnings. Have stocks fully discounted a sober outlook? We don’t think so.
Stocks fell slightly Friday but still rose for the second straight week, something that hasn’t happened in months. Economic data was mixed with the big number being Friday’s employment report that showed once again that labor demand is still robust. Interest rates rose as fears of imminent recession receded. It is hard to declare we …
June 13, 2022 – Friday’s report on Consumer Prices told us all that the fight against inflation will be harder than previously anticipated. This week, the Fed will increase interest rates again. It may suggest the ultimate Fed Funds rate this cycle will need to be higher than previously thought. None of this is good news for equity investors.
Friday’s CPI report didn’t make investors happy. Led by sharply higher energy expenses, and the fastest growing shelter costs in decades, the message loud and clear was that inflation shows no signs yet of abating. Recognizing that government steps to curb inflation only began in March, the numbers we are seeing now weren’t impacted one …
May 25, 2022 – While the Dow tries to find its footing, the NASDAQ continues in steep decline as one former darling after another faces reality. It’s an ugly picture and it isn’t over for the speculative end of the market. for those looking for safer havens, more dependent on predictable cash flow growth, the picture is far better. The contrast between the two worlds was most evident yesterday.
Stocks fell once again although a sharp afternoon rally reduced the damage. Still, the NASDAQ fell another 2.4% after a prominent social media company lowered earnings guidance just a month after it previously offered a somber outlook. As a group, social media and related companies depend on advertising for revenue. With the economy slowing and …
May 2, 2022- When leadership gets taken out to the woodshed, the whole market dies. That is what happened last week. While some escaped (e.g., Microsoft) the loud and clear message is that the big boys of the S&P 500 are now at or near economic maturity. That isn’t a message a market already worried about interest rates and recession wanted to hear.
Stocks sank on Friday to close out one of the most miserable months for equities in many years. The NASDAQ took it on the chin the worst after Amazon# reported a weaker than expected outlook for its retail business when it reported results Thursday night. On Friday, Amazon# suffered its worst percentage loss since the …
March 25, 2022 – Investors continue to grapple with inflation, war news, Fed tightening and valuations. Historians will point to stocks not topping until earnings peak, inversion occurs and/or better alternatives. We got some answers over the past few weeks but cloudiness prevails, for now.
A few weeks ago, there were almost no positives to think of. Most investment advisors were bearish. Cash was sitting on the sidelines earning nothing. Short sellers were pressed. Russian invasion continued to look worse by the hour. Oil, wheat, natural gas and many other commodities spiked higher even after doubling since Covid. The most …
March 21, 2022- The Fed did what it said it would do, economic growth remains intact, and the war isn’t getting worse by leaps and bounds. That set the table for a strong rally in stocks. Is the bottom in? Or is this just a bounce? The answer may be a little yes and a little no. For some stocks, the bounce might be over, but if the economy stays solid, there remain plenty of opportunities.
Stocks rose sharply all week as the NASDAQ rebounded out of bear market territory and both the Dow and S&P 500 cut their 2022 losses roughly in half. Oil prices remained volatile closing at over $100 per barrel. Pain at the pump continues but it isn’t getting worse, at least for now. Interest rates rose …
March 7, 2022 – While the war outcome continues down a path leading to a Russian occupation of Ukraine, the economic costs are becoming both starker and more apparent. Gasoline prices are rising close to $0.50 per week. If anything, the pace is accelerating. Wheat, aluminum, copper and palladium are spiking as well. These root commodity price increases will flow into a massive array of products. Inflation is quickly becoming more supply constrained than demand driven. The Fed’s weaponry can’t increase supply.
Stocks fell last week for the fourth week in a row, a combination of inflation fears and the war in Ukraine. Bond yields fell amid a flight to safety. The news from Ukraine is discouraging, to say the least, but it isn’t unexpected. Russia has overwhelming military advantages and continues to make progress in its …
January 10, 2022 – If there was a message last week, it was that speculative fever is dissipating as the Fed winds down its pace of bond purchases. No one knows when the purging of speculation will end but it probably will be with a thud, not a whimper. Market rotation to financials, industrials and energy names suggests the economy continues to thrive despite Omicron. The rotation can go a bit farther. The high growth sector got very overpriced, outpacing cyclical and value stocks for years, and it could take several more months for the rotation to run its course, allowing for some intermittent bounces and reversals. The overall market is down only modestly as the speculative fringes blow apart.
It was a tough week for stocks particularly on the NASDAQ. The speculative end of the market took the biggest hit as bond yields rose in line with continued economic growth. I noted last week the relevance of the January barometer. While not always valid, there is a trend that says, “as goes January, so …