(Please enjoy this updated version of my weekly commentary published April 22nd, 2022 from the POWR Value newsletter).
The best way for me to answer the 3 pressing questions in the intro is by sharing with you the presentation I recorded yesterday at the MoneyShow’s Virtual Expo. This is a very timely piece you should check out now:
Bear Market Scare: Inflation and Inverted Yield Curve
I realized that I have talked about both of these vital topics, inflation and inverted yield curve, in my commentary. Just some random thoughts here and there.
However, topics with this much bearish foreshadowing deserve a more deliberative consideration and response.
That is why I put it all together into one coherent presentation to understand the truth behind why these topics do strike fear in the hearts of investors.
While at the same time pointing out some of the fallacy and flaws in the logic which, more likely, points to more bullish times ahead.
Please consider this webinar the heart of our conversation today. So watch it now before moving on with some additional thoughts below. Watch it here >
Let’s pick up the conversation from there as we continue to monitor the economic data. That’s because any recessionary whispers now could become bearish screams down the road.
Only 3 reports of note this past week…all are in the positive camp.
First is the Jobless Claims report from Thursday which came in once again under 200,000. This is a truly monumental statement of the strength of the employment picture since the last time we were doing this well was all the way back in the late 1960’s.
Next we should consider the Philly Fed survey from Thursday, which also remains firmly in the positive camp at 17.6.
The forward looking New Orders indicator was equally as good at 17.8. However, the show stopper is the off the charts 41.4 reading for employment.
Lastly, we should turn attention to the PMI Flash readings from this morning:
55.1 Composite
59.7 Manufacturing Component
54.7 Services Component
Yes, it is true this is down a notch from previous readings. But results in the high 50’s and low 60’s are not built to last. In fact, some of that is what was behind the rampant inflation.
So as we cool down to a more realistic 53-55 range it still points to ample economic growth, but perhaps less inflationary pressure.
The next two weeks has a slew of interesting economic reports, but I think the real eye opener will be if there are any surprises on the GDP front as Q1 numbers come out Thursday 4/28.
I don’t think that most investors are really aware that current projections point to it slipping to only a +1.1% growth rate. That is pretty modest growth when a normal, healthy economy spends most of its time between +2 to 3%.
Now imagine that this report comes on the low side. Like closer to 0%. No doubt that would be a scary notion to investors that would stoke fear that we are tipping over into recession and bear market territory.
On the other hand, if GDP comes out better than expected. And that catalyst combines with what appears to be a solid earnings season, then stocks could be ready to break out significantly to the upside.
The point is that next week is a tricky one for investors given what I share above. We are prepared for either outcome and ready to act accordingly.
Portfolio Update
Last week we proudly reported the oddity that the market fell -2.13% and we miraculously enjoyed a +2.13% gain.
This week we were not as fortunate. This time around the S&P tumbled another -2.75% while we got trimmed by -1.39%. Still 50% less pain than the overall market…but few awards get handed out for being less bloody ;-)
So, lets pull back to the full year picture where today’s drubbing has us back in negative territory on the year. But only -0.21%.
I hope you agree that is a far cry better than the -10.37% for the S&P 500 or even uglier -13.57% for the Russell 2000.
The point is that our approach is working better than most, but when the overall market is getting pounded it is hard to avoid all the beatings.
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SPY shares closed at $426.04 on Friday, down $-12.02 (-2.74%). Year-to-date, SPY has declined -10.02%, versus a % rise in the benchmark S&P 500 index during the same period.
About the Author: Steve Reitmeister
Steve is better known to the StockNews audience as “Reity”. Not only is he the CEO of the firm, but he also shares his 40 years of investment experience in the Reitmeister Total Return portfolio. Learn more about Reity’s background, along with links to his most recent articles and stock picks.
After Friday’s Stock Market Plunge…What Comes Next? StockNews.com
