๐๐ Calling All Optimists in this Market!
Happy Hump Day everyone!
Over the last week we saw Snap plunge 30% after earnings report, Starbucks announced they will exit Russia after 15 years, Biden said the U.S. would intervene if China invaded Taiwan, Lyft to pause hiring and trim budgets, Elon Musk paid $250,000 to a flight attendant who accused him of sexual assault, and the Smallpox vaccine is in high demand after the recent Monkeypox outbreak.
Enjoy this weekโs Hump Days!
- Humphrey, Rickie & Tim
In the Markets
Featured Story
After weeks of bloody red days in the market followed by small rebounds, the dip continues to dip. While it may seem that a recession is near, some prominent Wall St. market strategists would beg to differ; offering a little bit of optimism in a market that has had very little of it ever since the beginning of the new year.
Goldman Sachs and JPMorgan Chase have come out to say that investor fears of an imminent recession in the U.S. are overblown and that the negative outlook on the stock market may have gone too far.
U.S. equities have fallen dramatically on the backs of stubbornly high inflation and an aggressive Federal Reserve looking to raise interest rates. Stagflation concerns have been on high alert - the highest since 2008 - which is prompting investors to hold onto their cash and go underweight on equities.
Stagflation is defined as a period of inflation combined with a decline in the GDP and investors are wary of a period of stagflation because of the death spiral it can put our economy in. Economic stagnation results in increased unemployment, which in turn decreases the purchasing power of consumers, meaning less consumer spending leading to even slower economic growth.
However, Goldman and JPMorgan donโt seem too concerned about stagflation, claiming that the recent rotations within the U.S. equity market indicate that investors are pricing in elevated odds of a downturn, compared with the strength of recent economic data. JPMorganโs Marko Kolanovic said that he does not expect a recession this year due to โsummer increase in consumer activity on that back of reopening and China increasing monetary and fiscal measures.โ Credit Suisse also sees particular recovery potential in equity markets once real yields peak.
This is a scary time to be an investor. People are losing thousands, hundreds of thousands, per week as the market continues to fall. The important thing is not to panic and sell at a market low. Iโll leave you with a famous quote by Warren Buffett for you to keep in your back pocket as you read the news and watch the stock market.
โBe fearful when others are greedy, and be greedy when others are fearful.โ
Weekly News Roundup
Monkeypox Outbreak is โContainableโ, WHO says as it confirms more cases (CNBC)
As of Tuesday, the WHO confirmed 131 cases and 106 suspected cases, although they stated publicly that the recent outbreak in non-endemic countries is โcontainableโ. The majority of the cases are being spread through sex and health authorities noted a particular concentration of cases among men who have sex with other men.
RH: Media is trying to make it seem like this is the next major pandemic to sell views and keep your attention. Be wary!
Fed to Plow Ahead on Half-Point Hikes, Undeterred by Stock Slump (Bloomberg)
Kansas City Fed President Esther George said Thursday that they will continue raising interest rates to cool the hottest inflation in decades and while she acknowledged that equities were having a โroughโ week, she chose not to soften the tone set by Jerome Powell. After raising rates by 50 basis points, a slowing economy and reduced price pressures set the stage for a debate on easing back to quarter-point hikes.
HY: This needs to be done to curb inflation, but it may come at the expense of the economy down the line.
More Subprime Borrowers Are Missing Loan Payments (WSJ)
Borrowers with limited or troubled credit histories are defaulting on credit cards, car loans and personal loans; a sign that the healthiest consumer lending environment on record in the U.S. is coming to an end. The share of subprime loans that are at least 60 days late is rising faster than normal and delinquencies rose month over month for the eighth time in a row, according to Equifax.
Charts of the Week
At around -18%, the selloff this year is well beyond the usual range of 10%+ corrections and into territory seen mostly only during recessionsโฆ
Corrections outside of recessions typically ended in 3 months. The current selloff is already into the 5th month and is approaching durations seen only during recessionsโฆ