• Menu
  • Skip to right header navigation
  • Skip to main content
  • Skip to secondary navigation
  • Skip to primary sidebar
  • Skip to footer

Before Header

Philadelphia Wealth & Asset Management Firm

wealth management

  • Why TBA?
    • Why Tower Bridge Advisors?
    • FAQs
  • Who We Serve
    • Individuals & Families
    • Financial Advisors
    • Institutions & Consultants
  • People
    • James M. Meyer, CFA® – CEO
    • Robert T. Whalen – Principal
    • Nicholas R. Filippo – VP, Sales & Marketing
    • Jeffrey Kachel – CFO, Principal & CTO
    • Chad M. Imgrund – Sr. Research Analyst
    • Christopher E. Gildea – Senior Portfolio Manager, Co-Chief Investment Officer
    • Daniel P. Rodan – Sr. Portfolio Mgr.
    • Christopher M. Crooks, CFA®, CFP® – Senior Portfolio Manager, Co-Chief Investment Officer
    • Michael J. Adams – Sr. Portfolio Manager
    • Shawn M. Gallagher, CFA® – Sr. Portfolio Mgr.
  • Wealth Management
    • How to Select the Best Wealth Management Firms
  • Process
    • Financial Planning
    • Process – Equities
    • Process – Fixed Income
  • Client Service
  • News
    • Market Commentary
  • Video
    • Economic Updates
  • Contact
    • Become A TBA Advisor
    • Ask a Financial Question
  • We are looking to add advisors to our team. Click here to learn more!
  • We are looking to add advisors to our team. Click here to learn more!
  • Click to Call: 610.260.2200
  • Send A Message
  • Why TBA?
    • Why Tower Bridge Advisors?
    • FAQs
  • Services
    • Individuals & Families
    • Financial Advisors
    • Institutions & Consultants
  • People
    • James M. Meyer, CFA – Principal & CIO
    • Raymond F. Reed, CFA – Principal
    • Robert T. Whalen – Principal
    • Nicholas R. Filippo – VP, Sales & Marketing
    • Jeffrey Kachel – CFO, Principal & CTO
    • Chad M. Imgrund – Sr. Research Analyst
    • Christopher E. Gildea – Sr. Portfolio Mgr.
    • Daniel P. Rodan – Sr. Portfolio Mgr.
  • Wealth Management
  • Our Process
    • Financial Planning
    • Process: Equities
    • Process – Fixed Income
  • Client Service
  • News
    • News & Resources
    • Market Commentary
  • Videos
    • Economic Updates
  • Contact
    • Become a TBA Advisor
    • Ask a Financial Question
wealth management

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.

//  by Tower Bridge Advisors

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 competition increasing, the combination proved to be another dagger in the hearts of speculators. Separately Lyft, one of the leading ride sharing companies, reined in its outlook and said it would have to reduce overhead as a result. Finally, it was announced that April new home sales fell by the largest amount since 2013. High mortgage rates, a wet and cool April, and overall softening demand combined to wreck havoc. All in all, it was another day when the news simply was worse than declining expectations. Stocks won’t bottom until expectations and future reality come more into line.

But all is not as terrible as I just painted. Housing activity is still well above its 5-year average. There are few signs that real GDP is in decline. There are emerging signs that inflation has peaked. Gasoline futures are down more than $0.25 per gallon. That should show up at the pump before too long. Retailers from Amazon# to Wal-Mart to Target all find themselves with too many workers and too much inventory. The cure for too much inventory is lower prices. Freight costs are falling. Small business executives are as downbeat as they have been in years. That suggests the JOLTS survey of new job openings will start to show declines before too long and the Fed has only begun to raise rates. Two 50-basis point increases are planned for June and July. The goal has been to get the Federal Funds rate to about 3% before year end. With signs of economic slowing already evident, that target could prove to be too high.

One shouldn’t read too much into April data. It’s just one month, a cool and damp one at that. In some surveys, May looks a little better. It will probably take 3-4 months to get a clearer picture. Until then the market’s mood swings will continue to be volatile, but there have been no signs of panic, the sort of capitulation that marks market bottoms. What we have started to see over the past month, however, is a rapid increase in selling by retail investors. Normally, that happens much closer to the end of a bear market than the beginning.

All this suggests we might be in the later innings of this savage decline, but it doesn’t mean the correction or bear market is over. For that to happen, we need to see signs of an economic bottom in the coming months, and we must see an end to the purge of excess speculation.

I mentioned Lyft briefly earlier. The stock was down over 15% on the news. Its largest competitor, Uber, was down close to 10%. Both traded at all time lows. Yet Uber still has 41 analysts with a Buy rating, 4 who say hold and none who say sell, at least in writing. The economic model of these ride sharing companies simply doesn’t work. Today, prices to use Uber or Lyft are significantly higher than using a conventional cab and both still lose money. Drivers want more money. Fuel costs more. There is nothing to differentiate one ride sharing company from the other besides price. I offer this as an example, but the public market over the past several years has been littered with exciting stories filled with lots of promise and no earnings. Many of these stocks are now down well over 50%. Before all is said and done, they will need to fall 90% or more.

While the newbies struggle to survive, the giants who grew up earlier this century are starting to mature. Amazon’s retail business is suddenly growing only a little faster than retail in general. Netflix# is losing subscribers in the U.S. as we leave our couches and get back to work. The ad-free subscription model may have to be modified. Facebook is losing users to edgier sites like Tik Tok. New iPhone sales are barely growing. Call it maturity or the law of large numbers. Whatever. It is happening as the market reprices growth. Lower multiples and lower growth make a bad combination. The five largest companies in the S&P 500, all tech firms, are showing signs of maturity. All are now down more than the S&P 500 overall and give little hint that lows have been set. Yesterday both Amazon and Alphabet# set new 52-week lows.

Yet, there have been few safe havens in this market. Most are defensive in nature. Consumer staples, selected REITs, utilities, and large drug companies all share two traits. They are relatively unaffected by moderate changes in overall economic growth rates, and they pay large dividends that grow slowly but steadily over time. Current dividend yields of 2-4% compete favorably with bond returns.

Lest anyone forget, the theoretical price of a stock is the present value of future cash flows. I said cash flows, not revenues. Look at the oil patch. Companies like Chevron sell at record highs. Yet oil prices were much higher in 2008. Younger companies that started as wildcat drillers first sought to maximize production whatever the cost. Wall Street screamed that it wanted earnings more than revenues. The companies listened and cut spending. Revenue growth slowed but cash flow skyrocketed. Needless to say, they have been this year’s darlings of Wall Street.

Slow growth isn’t a bad thing. If you are a big retailer, you don’t have to open a bunch of new stores. Instead, getting more business from existing stores, or developing another revenue channel like online sales will yield more profits and prodigious cash flow. In a market like this, the formula is to be less dependent on the overall economy, focus on cash flow, and return money to your owners (shareholders) consistently. Whenever the bear market ends, I suspect investors willing to step back in will chase rising cash flows before they chase sexy stories with unproven earnings models.

Amid the carnage in the stock market, bond yields have retreated a bit. Perhaps that reflects a flight to safety. Perhaps it is a judgment that the Fed won’t have to raise interest rates as high as previously anticipated. Probably a combination of both. Whatever the cause, it creates a more solid valuation floor for equity investors. A near-term key will be the ability of stocks to hold above last Friday’s intraday low. The NASDAQ set a new low yesterday, but the S&P 500 and Dow have held. While I think, ultimately, that those lows will be broken by all indices, there are improving reasons (e.g., lower bond yields, a slower growth economy) to think many sectors of the market can find some footing. Valuations are close to normal, but in a bear market, stocks must be compellingly cheap for a bottom to be set. That is likely months away. Until then, the near-term strategy is to hunker down, reduce risk and prepare for brighter times ahead.

When markets go from euphoria to capitulation, the recovery doesn’t begin with speculative leaders of the past regaining control. Rather returning investors will likely be risk averse and focus on predictability, cashflow and safe returns. Growth investors will be looking for reasonably priced names whose growth will accelerate for the next several years, not the old favorites in decline. When similar speculative purges occurred, many of the leaders before the decline regain the leadership mantel. Some will; most won’t. As investors, one always must look forward.

Today, Mike Myers is 59. Frank Oz is 78. For those who aren’t familiar with Mr. Oz, he is a puppeteer who is the voice behind such legends as Miss Piggy, Cookie Monster and Yoda.

James M. Meyer, CFA 610-260-2220

Tower Bridge Advisors manages over $1.3 Billion for individuals, families and select institutions with $1 Million or more of investable assets. We build portfolios of individual securities customized for each client's specific goals and objectives. Contact Nick Filippo (610-260-2222, nfilippo@towerbridgeadvisors.com) to learn more or to set up a complimentary portfolio review.

# – This security is owned by the author of this report or accounts under his management at Tower Bridge Advisors.

Additional information on companies in this report is available on request. This report is not a complete analysis of every material fact representing company, industry or security mentioned herein. This firm or its officers, stockholders, employees and clients, in the normal course of business, may have or acquire a position including options, if any, in the securities mentioned. This communication shall not be deemed to constitute an offer, or solicitation on our part with respect to the sale or purchase of any securities. The information above has been obtained from sources believed reliable, but is not necessarily complete and is not guaranteed. This report is prepared for general information only. It does not have regard to the specific investment objectives, financial situation or the particular needs of any specific person who may receive this report. Investors should seek financial advice regarding the appropriateness of investing in any securities or investment strategies discussed in this report and should understand that statements regarding future prospects may not be realized. Opinions are subject to change without notice.

Filed Under: Market Commentary

Previous Post: « 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.
Next Post: 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. »

Primary Sidebar

Market Commentary

Sign Me Up!

Latest News

  • July 24, 2025 – Like the game of Go in China, or Igo in Japan, the evolving tariff negotiations between the U.S. and our trading partners are creating a constantly changing gameboard and continue to dominate the news cycle. Markets reacted positively yesterday to indications that Japan’s tariffs would be capped at 15%, less than the 25% expected, and a potential deal with the European Union. Tariffs are already having an impact on corporate earnings and outlooks, although equity markets continue to gain ground.
  • July 21, 2025 – Last week was a quiet week for news. The real heart of earnings season starts to kick in this week. Meanwhile the new crypto legislation signed into law last week is likely to change our lives a lot more than what we will learn from a few earnings reports.
  • July 17, 2025 – Stocks rebounded after President Trump clarified his stance on Federal Reserve Chair Jerome Powell. While consumer and producer price indexes suggest some inflation moderation, particularly in services, certain tariff-exposed goods continue to see price increases. Despite these pressures, the U.S. economy shows underlying strength, exemplified by strong bank earnings and robust consumer spending, though the long-term impact of escalating tariffs remains a key uncertainty.
  • July 14, 2025 – Tariffs and earnings will be in the bullseye of investor focus for the next three weeks. Earnings should be good with the weak dollar giving a boost to reported foreign results. As for tariffs, the announcements are likely to be scarier than the coming reality. But even with more muted final outcomes, the likely overall tariff picture will almost certainly be the most severe since the early 1930s. Tariffs will affect different companies in different ways, a factor likely to lead to an increasing dispersion in stock performance in the months ahead.
  • July 10, 2025 – Professional dodgeball exists in the form of the National Dodgeball League. The NDL was founded in 2004 and is the only professional dodgeball league in the US, sporting 24 professional teams. Investors, corporate management teams and our trading partners may feel like they are playing dodgeball this year due to shifting tariff policies. Market volatility has indeed been above average in the first half of 2025. So far, we have dodged a major economic slowdown, job losses or significant inflationary pressures from tariffs, although the second half of 2025 could witness a bounce in these metrics.
  • July 7, 2025 – Treasury Secretary Bessent talks of his 3-3-3 goals, 3% growth, 3% inflation and a reduction of the deficit-to-GDP ratio from over 6 to just 3. Those are mighty goals. The passage of the reconciliation bill may make short-term movement in the right direction but the ongoing buildup of debt may make reaching those long-term goals difficult.
  • July 3, 2025 – The second quarter of 2025 delivered a stellar performance for U.S. equities, with impressive gains across major indices driven by strong corporate earnings, AI enthusiasm, and eased trade tensions. Despite this rally, the market successfully navigated challenges including early tariff anxieties, signs of consumer stress, and geopolitical uncertainties. Looking ahead, investors are keenly watching the “One Big Beautiful Bill Act” and its potential impact on interest rates, inflation, and corporate profitability.
  • June 30, 2025 – Trump’s big beautiful bill is headed for the finish line. It isn’t done yet and likely will see further changes before it reaches his desk. As the administration buys the votes necessary for its approval, expect the impact on future deficits to rise. With that said, the bill will help to accelerate near-term growth. Second quarter earnings reports are just a couple of weeks away and they should be good. However, unlike Q1 when skepticism abounded, this time optimism is high. July is usually a good month for stocks but the sharp April-June rally may mute the pace of further gains.
  • June 26, 2025 – Labubu dolls are hard to get these days. These dolls are prized by children in China, along with some celebrity admirers such as David Beckham and Rihanna. The grimacing, elvish-looking creatures come in “blind boxes” that keep buyers in suspense over which one they might get, but can take weeks to acquire. They sell for as little as $20, but a rare variety recently sold at auction for $150,000. In spite of all the hand-wringing about inflation and tariffs, consumers around the globe continue to spend. However, patterns of spending have definitely shifted.
  • June 23, 2025 – Saturday’s bombing of Iran’s nuclear sites was shocking news but financial markets are taking the news in stride at least until they can assess the Iranian response. Economically, little has changed so far. The one elevated risk would be an attempted blockage of the Strait of Hormuz. While possible, that would be a very dangerous escalation that would evoke a powerful response. Markets, at least for now, place low odds of that happening. Thus, the economic impact of the raid so far is marginal and markets remain calm.

Footer

Wealth Management Services

  • Individuals & Families
  • Financial Advisors
  • Institutions & Consultants

Important Links

  • ADV Part 2 & CRS
  • Privacy Policy

Tower Bridge Advisors, a Philadelphia Wealth and Asset Management firm, is registered with the SEC as a Registered Investment Advisor.

Portfolio Review

Is your portfolio constructed to meet your current and future needs? Contact us today to set up a complimentary portfolio review, using our sophisticated portfolio analysis system.

Contact

Copyright © 2023 Tower Bridge Advisors

Philadelphia Wealth & Asset Management, Registered Investment Advisors

300 Barr Harbor Drive
Suite 705
West Conshohocken, PA 19428

Phone: 610.260.2200
Toll Free: 866.959.2200

  • Why Tower Bridge Advisors?
  • Investment Services
  • Our Team
  • Wealth Management
  • Investment Process
  • Client Service
  • News
  • Market Commentary
  • Economic Update Videos
  • Contact