by Robert Holman | The Defensive Advisor | www.defensiveadvisor.com
EQUITY MARKET RATING … 3.5 (0-4 bearish, 5 neutral, 6-10 bullish) … The market is rallying, but it may be short lived. Why? Severe risks. With Europe discussing a boycott of Russian oil and likely to do so, the Fed’s announcement that it’s considering a possible 50 bp increase in its key lending rate, short-term rates possibly rising above long-term rates this summer and a resulting recession this fall, the case for further declines in stock prices is looming large. The market could increase during the time that it takes for these issues to resolve themselves one way or another. But how long is that? Two days? Two weeks? Six weeks? Knowing all this, professionals have moved fast to commit money to purchases, and will be moving just as fast to take profits before they disappear.
Peace talks are meaningless without extreme economic confrontation of Putin; he has an agenda and won’t be stopped without pressure. Elevated consumer prices coupled with modest wage increases suggest a coming slow-down in economic growth. The market rallies when those pressures slip from focus, resulting in dramatic price swings.
We remain at 3.5 even though the market may continue to rally as it takes a pause or breather from all the negative news. JUST FYI - China would be a wild card factor here, if it was to interfere, and I confident it will not - it is not strong enough (?yet?) - the resultant drop in prices would be jaw dropping. It would however love to sell armaments to Russia.
EQUITY MARKETS and the ECONOMY … Inflation may start to look like it’s slowing - as future moths compared to past moths containing price increases and as port crowding continues to diminish - but the upward pace in prices will continue. Part of our inflation is being driven by political factors – war and Presidential banning of fracking. It’s difficult to get the impact of oil prices out of inflation data – it’s buried in electricity costs, transportation and delivery costs, costs of making goods for resale, etc.
Just as oil prices have reached levels that could incentivize drilling for new oil – above $100/Bbl. - along comes a political attempt to take away those funds from drilling by enacting a windfall profits tax (WPT). A WPT will move the cash to the Federal government to be spent on political programs. Then, funds for new drilling will be stalled, and oil prices will continue higher until the after-WPT cash remaining with the oil companies is enough to risk new drilling attempts at finding new oil. A WPT would contribute to the problem, not to the solution.
Why does it seem that everything Washington attempts is so-1980s? Such failed thinking? What about some new, creative ideas? Why not some 2020 solutions to 2020 problems? Why not something to speed up drilling, which increases oil availability and leads to reduced oil prices?
PORTFOLIOS … Position your portfolios consistent with these trends. If you are unsure what to do, call me and I’ll explain what ought to be done to help your situation. Just click here, and I’ll be happy to give you a complimentary portfolio evaluation along with a recommendation for two stocks to put into your portfolio.
I’ll also explain what’s good about your portfolio, how it’s likely to perform in upcoming months, and giving you a couple of ideas for improvement, all at no cost to you.
Alternatively, you may contact me by calling 972-702-6032, and I’ll give you a way to securely email your portfolio holdings to me and I will input the data for the evaluation.
TO MY CLIENTS … THANK YOU FOR YOUR TRUST. We’ve had great success since we started this RIA in mid-2018, for are doing better than the market return over the same time.
Excelsior Divitiae. Proverbs 21:5, 22:3, 27:12 and 3:56, Joshua 1:9, Ecclesiastes 8:7, 1Chronicles 12:32 and 29:11-13, and James 4:13-16.
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Opinions voiced in this post are for general information only and are not intended to provide specific advice to or recommendations for any individual, without complete knowledge of that individual’s total financial profile. No strategy assures success or protects against loss. Past performance does not guarantee future results.