12:00 TUESDAY – Stock Market Report #167 – 5/24/22
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.
My projection --- “we could soon have a week or two where the market goes up consistently, maybe 7-8 out of 10 days” --- seems unlikely, unless this week and next are rally weeks, which seems possible. Why? The market, measured from Monday to Friday, has been down 8 weeks in a row. 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”. I just had a strong idea that this would happen.
EQUITY MARKETS and the ECONOMY … Market interest rates are up 225bp (or 2.25%) so the Federal Reserve needs to raise rates at each of the next two meetings (in June and July) to catch up to bond market rates. A lower PCE report in late May or June may lead the Fed to slow down or at least pause after that. That could be great for stock prices, and it might lead to a fall/winter market rally.
Sales and earnings comparisons for several big box retailers have been below last year. This on top of a first quarter of estimated negative <0.6%> GNP growth. Stock prices may be headed lower if these trends continue.
Housing prices are up nationally over 20% year-over-year so far this year. However, retail sales were another sign of no real growth 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.