12:00 TUESDAY – Stock Market Report #168 – 5/31/22
Updated: Jun 14, 2022
by Robert Holman | The Defensive Advisor | www.defensiveadvisor.com
EQUITY MARKET RATING… 3.0 (0-4 bearish, 5 neutral, 6-10 bullish). The DJIA was down 8 weeks in a row until last week, and was down for 15 of the last 20 weeks. Whew.
My projection --- “we could soon have a week or two where the market goes up consistently, maybe 7-8 out of 10 days” --- did finally occur (8 out of 10, 9 out of 11), but it was not really as soon as I expected. Not only that, with one day down more than 1100 points, the 8 up days with that one gigantic down day, was not really what I had envisioned. But thankfully, we were up all 5 days last week. While this was nothing more than just a “relief rally” after so many down weeks, it could develop into a bear market rally that lasts a few weeks, perhaps longer. I will be dropping this commentary after this week.
EQUITY MARKETS and the ECONOMY … the three stocks that I bought last week seem to be on a significant upward course so far; let’s see if that trend continues. We still have ample cash to take advantage of lower prices should things go south.
Market interest rates are up so much from Fed pre-announcements that the Federal Reserve needs to raise rates at each of the next two meetings (in June and July) by 50 bp to catch up to bond market rates. If we get a lower PCE inflation report in late May, and maybe again in late June, that may lead the Fed to slow down or at least pause its rate increases for awhile. That could be great for stock prices, and it might lead to a fall/winter market rally. Conversely, the opposite may happen. Here are the recent trends:
April March Feb
PCE Deflator Core Inflation yr/yr 4.9% 5.2% 5.4%
First quarter sales and earnings comparisons have been erratic, some higher, some worse, adding to the difficulty in stock selection. This on top of a downward revised first quarter negative <1.5%> REAL GNP growth. 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 is for maximum employment consistent with low/moderate inflation.
INFLATION … the annual rate of increase in the CPI of 6.2% was a slower rate of increase than last month at 6.5%, 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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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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