12:00 TUESDAY – Stock Market Report #166 – 5/17/22
by Robert Holman | The Defensive Advisor | www.defensiveadvisor.com
EQUITY MARKET RATING… 3.0 (0-4 bearish, 5 neutral, 6-10 bullish). The DJIA has been down the last 7 weeks in a row.
If the DJIA closes up today, that would be up 3 days in a row. My projection --- “we could soon have a week or two where the market goes up consistently, maybe 7-8 out of 10 days” --- maybe has merit in this the third week of the “soon” remark. Remember my warning, that: “the chances of my being wrong on this are around 80% - it’s way too specific, and no one can consistently predict the future like this”.
EQUITY MARKETS and the ECONOMY … The Federal Reserve seems committed to raise interest rates by 50bp (one-half of one percent) at each of the next two meetings (in June and July) to catch up to inflation and bond market rates. However, a lower PCE report in late May or June may lead the Fed to slow down or pause in months after that. That could be great for stock prices, and it might lead to a fall/winter market rally.
April retail sales excluding autos, released today, increased 0.6%, the same as the increase in core inflation. That is another sign of no real growth in this dominant part of the US economy. Sales of food and building materials were actually down slightly, and gasoline stations sales were down significantly. But, retail sales are volatile, and next month could show an entirely different trend.
If new job creation continues to slow, that would signal the Fed to be cautious about raising rates, because of the Fed’s dual mandate (for maximum employment consistent with low/moderate inflation). We could see a period of stagnant growth and persistent inflation (stagflation). That would be very bad for stock prices.
INFLATION … the annual rate of increase in the CPI was a slower rate of increase than last month and could be the start of easing inflationary pressures (but one month does not make a trend).
PORTFOLIOS … After reading this report, if you are unsure what to do with your portfolio, call me to discuss your circumstances and I’ll explain what ought to be done to help your situation.
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TO MY CLIENTS … THANK YOU FOR YOUR TRUST. We’ve had great success since we started this RIA in mid-2018, and are doing better than the market return over the same time period.
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.