DNY59/E+ via Getty Images
DNY59/E+ via Getty Images
"The ability to simplify means to eliminate the unnecessary so that the necessary may speak." - Hans Hoffman
Participating in the financial markets is a never-ending learning experience. It has to be if you want to last in the business. That is one thing I always place great emphasis on to someone asking for advice on investing in the equity market. It's perfectly fine to read a few books or learn a few charts patterns to state, but don't think for a minute that is all you will need to know. If it was that easy everyone would be a very wealthy and successful investor. We know that isn't the case at all.
There is no substitute for experience and experience can only be gained by navigating markets and events as they occur and learning from mistakes along the way. Mistakes are inevitable. If an investor cant deal with defeat they need to leave the scene now. The key is to not lose too much money when you make them so you can still be around in the future to take advantage of the lessons learned. Trust me, you will lose money at the outset. Depending on your developed skills and emotional mindset you will stop the heavy bleeding real fast
Inflation is a big deal, and I have repeatedly warned that the policies enacted in 2021 were going to lead to higher inflation. None of this is surprising nor is the fact that the fed has entered the scene, reversed loose monetary strategy, and has no choice but to try and fight it. Hyperinflation, the kind that could collapse the dollar, would likely be worse than any recession caused by steps to prevent it. The markets are on their own now and on top of that, they are trying to shake off everything else being thrown at them.
Investors are involved in a market that is act first, think later mindset, the specter of higher interest rates and higher inflation rules the price action. This adds more concern that the stock market is a treacherous playground now. The consensus narrative continues to see rates rising, presenting a headwind for stocks. Many investors hit the sell button first then decide if rising interest rates and/or inflation is problematic enough to warrant their decision. Not exactly the way to manage your money.
Add in the Ukraine invasion and the equity markets have become mesmerized with the daily/weekly headlines. Going back to the economic issues, it isn't written in stone that all has to end badly. However, let there be no doubt that what is transpiring now in response to these issues is more self-inflicted pain.
Proceeding cautiously and tactically has been the way to proceed, and it's more important than ever to listen to the stock market's message now.
Mondays (or the first trading day of the week when Monday was a holiday) have not been friendly to bulls this year. In the nine weeks so far this year, the S&P 500 has opened the day lower seven times by an average of 0.54%, and this week made it eight. Poor sentiment remains in place across the board. Corrective periods are noted by failed rallies and the lack of ANY buying interest. This market backdrop is very weak technically and is showing those typical signs.
On Monday I sent out an investment note;
When oil prices spike the stock market often goes through a period where it becomes correlated to oil prices. WTI goes up, stocks go down, WTI retreats, stocks stabilize.
As if we need another reason to add to volatility, we are now in one of those periods where equities may get whipsawed by how WTI trades."
At some point, this correlation will break but for now, it may rule the short-term swings. Oil spiked higher on Monday and Tuesday and the stock market took another hit.
Before the stock market opened on Wednesday WTI was trading $7 lower at $116. It was no coincidence then that all of the indices opened the day sharply higher. The stock market rally continued as WTI ended the day at $107 down 13% on the day. The S&P gained 2.5%, closing at 4278, cutting into the losses from the first two trading days this week.
The headline-driven market finished the week with more losses on Friday as the price of oil rose 3+% during the day.
All of the indices closed lower for the week. While the NASDAQ and S&P 500 have posted back-to-back weekly losses, the DJIA's weekly losing streak was extended to five.
While justified, Economic Warfare comes with a steep price. Make no mistake it can't be compared to the Pain, Suffering, and Death that is taking place in Ukraine now. However, the stage for what is going on today was set will before this war broke out.
The major impact so far has been on commodity prices, of which Russia is a large global exporter, particularly to Europe. Therein lies the issue for them and other global markets. The economic relationship between the economies of many euro countries and Russia is more complex. For one thing, their energy dependence is staggering. The EU imports 40% of its natural gas from Russia and prices paid in the EU are at a record high that is going to severely affect their consumers.
In addition, the EU imports 30% of its oil from Russia as well. Similar to everyone else in the world they will feel the effects of higher oil and gasoline prices. This is why the Eurozone is scrambling to reconsider its flawed energy strategy and the first step is to look at importing LNG. Unfortunately, none of these changes can come quickly and in the meantime, this is a dire situation that has the potential to have a tremendous impact on their economies. A situation that will stunt growth and open the door for the Eurozone to go back into recession, and their stock markets are reflecting that possibility.
Ironically the EU was warned and at that time they scoffed at the idea they were headed for this debacle. That 2018 prophecy which was simply a call for "common sense" predicted any type of "dependency" is a HUGE mistake.
In addition to the other economic risks associated with this invasion, a complete Russian default on their debt has a higher probability of occurrence. That can have a large impact on the Eurozone banking system, and the spillover effects may be felt in other global economies. I am NOT expecting a global Financial crisis, BUT there will be ramifications that will slow if not KILL growth.
Heading into 2022, there was a ton of optimism towards international stocks. After years of underperformance, the feeling was that valuations had become so skewed in favor of international stocks that they were due for their day in the sun. When the calendar finally did flip, international stocks came out of the gate positively, and as U.S. stocks pulled back, international stocks held up much better.
US vs. Global Stocks (www.bespokepremium.com)
US vs. Global Stocks (www.bespokepremium.com)
The resilience of international stocks didn't last long, though. As the Russia-Ukraine war has escalated, investors have been ditching international equities en masse, while US stocks have held up relatively well. Over the last year now, US stocks, as measured by the S&P 500 tracking ETF (SPY) are up over 15%. International stocks, on the other hand, as measured by the SPDR MSCI ACWI ex-US ETF (CWI) are now down over 5%.
The equity market declines in the U.S. have been grim, but over in Europe, the backdrop was worse.
The STOXX 600 benchmark was in freefall dropping 13+% in 6 trading days before the situation stabilized this week.
Furthermore, many of the global ETFs (ex U.S and Canada) (EFA) have violated their long-term trendlines as a sign of caution for an impending BEAR market. While that is NOT confirmed, I still decided to eliminate my global equity exposure. It's simply impossible for me to stay in tune with the fundamental backdrop like I can here for U.S equities. Add that to the deteriorating technical picture and I've decided to sit on the sidelines when it comes to international exposure.
The entire run to add international exposure by money managers has been halted. In my view, these markets are now some of the riskiest to be involved in.
The situation in the Eurozone should force investors to sit up and take notice. This is something that will have to be monitored very closely. A recession in the EU will have a rippling effect throughout the global economy and that increases the prospects of the entire globe slowing down. Only the U.S. and China will be the key players that can help the world avoid a global recession. If our economy falters due to overwhelming inflationary pressures that will leave only China as the last country standing with growth being projected for 2023 and beyond. Furthermore, China is not threatened by inflation as its rate sits at 1.8%.
As I wrote that last paragraph it became evident that what I have been so concerned about regarding a "green energy" policy strategy is here. It has backfired and is being shown to be a colossal mistake. This has the potential to have greater ramifications than anyone might imagine. The door is open and China appears to be standing at the doorstep to begin exercising more power and dominance. That won't happen overnight, BUT there are plenty of countries, the U.S. included that are VERY dependent on CHINA, and their dominance in many markets stands to grow.
Back in 2019, the warnings to get out of China were viewed anywhere from tyrannical, maniacal comments to the ramblings of an unhinged dictator. With the U.S. so dependent solely on China for our solar farms, EV batteries, etc to medical supplies, the strategy to get out from under and change this situation wasn't unhinged or tyrannical, it was common sense. Ironically when it comes to solar dominance, the Administration just made China even more powerful. Ironically, China controls the pricing and in essence controls the "green energy" movement here in the U.S.
Given all of these signs, an investor can conclude that having exposure to China might be a good idea. However, their anti-business policies have been a solid deterrent to start adding investments there, despite some believing the worst may be over as China does need to keep the growth engine going.
So while I'm not ramping up my Chinese investments just yet, the takeaway is black and white. China is in the driver's seat on many issues that are of utmost importance to the U.S. and there have been no conversations nor proposals put forth to address that problem. Instead, U.S. dependence is growing.
CPI surged 0.8% in February with the core rising 0.5%. There were no revisions to the 0.6% increases for both in January. The 12-month rates rose to 7.9% year over year from 7.5% y/y on the headline and 6.4% y/y versus 6.0% y/y on the ex-food and energy component. These are the highest going back to 1982.
Household net worth rose at a 15.4% rate in Q4 to $150.3 Trillion, according to the Fed's Z.1 report, after rates of 7.8% in Q3 and 17.7% in Q2. During the 4th quarter; Total asset values rose 14.7%, Financial asset values rose 14.4%, and Real estate values rose 14.8%.
Household Net Worth St Louis Fed (www.fred.stlouisfed.org/series/TNWBSHNO)
Household Net Worth St Louis Fed (www.fred.stlouisfed.org/series/TNWBSHNO)
Analysts assume a -4% Q1 net worth contraction rate thanks to the stock market pull-back, though with an ongoing real estate boom. The "wealth effect" is an important metric that feeds into overall consumer activity.
It's no longer an "OPINION" of how the economy is doing, and there is no need for debate. Small Business and Consumer sentiment are the FACTS confirming the frustration that exists in how the "issues" are being addressed.
Sentiment on behalf of small businesses fell for the second month in a row in February. At 95.7, the NFIB's Optimism Index has now dropped to the lowest level since January 2021 and continues to closer to its COVID low and further from its high. Inflation remains front and center of what most concerns small businesses.
NFIB Survey (www.bespokepremium.com)
NFIB Survey (www.bespokepremium.com)
The combined percentage of respondents reporting either cost or quality of labor as another important problem continues to be a prevalent topic with 33% of firms reporting as such. That is down slightly from 34% in January thanks to the decline in quality of labor. Most other categories fell to or remained at record lows. Such was the case for Poor Sales, Government Requirements and Red Tape, and Financial & Interest Rates.
Consumer Sentiment continued to decline due to falling inflation-adjusted incomes, recently accelerated by rising fuel prices as a result of the Russian invasion of Ukraine. The March Michigan consumer sentiment index came in at 59.7 versus a consensus of 61.7. That was a drop of 3.1 points, and it follows the 4.4 point decline in February.
Consumer Sentiment (www.sca.isr.umich.edu/)
Consumer Sentiment (www.sca.isr.umich.edu/)
Personal finances were expected to worsen in the year ahead by the largest proportion since the surveys started in the mid-1940s.
The year-ahead expected inflation rate rose to its highest level since 1981, and expected gas prices posted their largest monthly upward surge in decades. Consumers held very negative prospects for the economy, with the sole exception of the job market.
JOLTS reported job openings fell 185k to 11,263k in January. However, December was revised sharply higher to a 526k rebound to 11,448k. The revision left December as the new all-time peak and January the second best.
This past week we got investor sentiment data from Sentix for March, and the results were pretty grim. As shown in the table below, global investors’ expectations collapsed across Europe, with Eastern Europe hit especially hard. Sentiment towards that region is the lowest on record amidst not just the massive financial impact of sanctions on Russia but also nervousness that the conflict could spill beyond Ukraine and general risk aversion globally.
The best example of that sentiment hit might be Poland where the Zloty has fallen 9.4% over the past couple of weeks in response (worst since 2008). Shares of EPOL (MSCI Poland) are down 24% since Putin announced his intention to invade Ukraine.
After a concerning collapse to October lows, capital goods order volumes from German manufacturers have surged over the last three months to the tune of 13.3%. Of course, the war in Ukraine has thrown all pre-invasion global macroeconomic trends into flux, but the ramp back upwards is encouraging all the same.
The U.S. Is Buying Flowers When It Has A Rose Garden In Its Backyard.
Make no mistake, the economic warfare we find ourselves in may have been exacerbated by the invasion but the path was set. Oil prices were nearing highs before Americans could identify Ukraine on a map, well before the invasion. The inflationary backdrop was also in place well before the war broke out in Ukraine and well before the price of WTI became an issue.
Since the start of 2021, there has only been one month where the headline CPI rose less than expected.
Oil has spiked further, the risk of inflation staying around for a while has increased, and could bring a hyperinflation cycle. That will increase the chance for a global recession that brings the U.S. down with it. All are plausible scenarios now.
Yet, the response to the issues is not offering resolutions that offer a change in course to avoid what is now a distinct possibility; recession here in the U.S. Please consider the following. The dreaded carbon footprint that is left to produce a barrel of oil here in the US versus producing it in another country is the SAME. I could make an argument that the US does a "cleaner" and better job than others, BUT that isn't necessary to prove the point.
The barrel of oil that the US then has to import will ADD to the carbon footprint on its voyage to our shores unless some believe it magically appears at our refineries. The same is true for the anti-pipeline stance. Instead of oil flowing in a pipe, the diesel engines in the trains and trucks utilized to ship it to where it is needed ADDS to the carbon footprint.
No one, but on one, that orchestrated this "green agenda" has put serious thought into ANY of these facts. It's void of common sense and it also has emboldened and enriched a maniac to put the world on edge with an invasion of a sovereign country. Due to a failed green energy movement, the EU economy is backed into a corner and headed for crisis mode.
The U.S. followed the same path and now this economy is ready to join the EU in that corner. In my view, many options can avoid the same fate that I see for the EU, BUT at the moment NONE of them are being pursued. The war on fossil fuels has produced a loser. The U.S economy.
It matters little what side of the fence an investor is on regarding the "Green Energy" movement as it relates to the Energy situation we find ourselves in today. "Opinions" are of little value. "Facts" should determine how an investor navigates this issue.
Recent developments have given us a view of the tactical approach offered by governments around the world. There are now two scenarios that are in play to bring down high energy costs to help the inflation scene, and it's very simple. First, an oil-producing nation will have to step up and attempt to bring the balance between supply and demand in balance.
The other scenario that reduces the demand side is a recession.
The preferable scene for global equity investors is the first but at the moment that option is not getting the priority attention it deserves. In the short to intermediate term that leaves energy costs at high levels. IF there was an end to the Russia/Ukraine war tomorrow we could expect oil to drop but more than likely it will settle where it was before the invasion around $90.
Consumers both here and around the world have dealt with these prices before BUT they haven't experienced this added drag on their spending power with an embedded 7+% inflation rate.
The longer this situation is allowed to continue the greater the risk for the second scenario to enter the scene. It's a fluid situation that quite frankly is very difficult to navigate. A change to energy policy can enter the scene, but no one knows IF/WHEN that occurs and IF it occurs will the added oil supply be enough to stem the tide of higher prices.
The mixed and confusing messages are indicative of the complete disarray that exists on "policy" today. The Energy secretary throws up a white flag asking energy companies to drill while bombs are still being dropped in the form of a new proposal for a windfall profits tax. If any new tax is enacted it puts the nail in the coffin and buries the notion that more oil will be produced here in the U.S. That will then seal the deal on the U.S being more dependent on foreign oil. Regarding that "white flag", we'll also now need to see how far "policy " will go regarding regulatory hurdles and other issues that have kept oil producers reluctant to spend. It might be a positive start but it's is far from a "done deal".
We've discussed how energy plays into the economy and the rippling effects it has on inflation. It's an issue that we can't just dismiss and wish to go away. The FACTS confirm "Dependency" isn't an answer. It is yet another stumbling block for investors that will keep market volatility elevated as emotion is also firmly embedded in this backdrop.
EV's as an "alternative"? The picture isn't so rosy for the EV industry today. Besides being scarce and dependent on China, rising raw material costs for batteries have skyrocketed, and that was before the latest spike in March. Nickel is up about 90% during this inflationary spiral and unless we believe Russia the 4th largest producer of Nickel is going to come back online anytime soon, it seems implausible that prices will tumble.
At the end of the day, the "alternative" isn't an "alternative" at all. EVs are the future, but considering all the "issues", that "future" isn't today.
The markets are in turmoil as this invasion just added to the already fragile recovery that was already on the edge due to an inflationary spiral. This correction may be the market's first signal of an upcoming slowdown. The combined effects of inflation and the absence of a pro-growth agenda will pressure consumers and the economy. This was the primary reason I was NOT in the camp that was calling for robust GDP growth in '22. So far that has proven to be correct and I don't see any evidence forthcoming to change that view.
Please keep in mind we are still hearing pitches for more spending with accompanying tax increases.
To that end, I have issued a report citing a total reassessment of the economic situation for the remainder of this year and into 2023. Consider that in less than 3 months, the forecasts for '22 did not mention ANY chance of a slowdown with the rapid rate of decline that is forecast now.
The stock market will sniff out the next major "change" and price action will confirm if it is a "Good" or "Bad" change that is on the horizon. I intend to follow that lead.
One of the unusual market dynamics during the current two-plus month correction has been the strength in EPS forecasts. As shown below, the estimated earnings of the S&P 500 over the next 12 months have continued to climb despite weeks of declines for stocks.
With the current market drawdown being quite large and EPS estimates holding up, that must mean all of the adjustment is happening by multiple compression. And that is indeed correct. This drawdown has seen the worst multiple compression of any major drawdown since 1990. The market is rapidly adjusting what it's willing to pay for earnings even though earnings aren't expected to drop and are expected to continue rising.
For now, this is a positive, but if the economy slows too much due to Fed hawkishness EPS estimates could be at risk as well as multiples.
Considering equities and other risk asset prices continue to swing violently, so too have readings on investor sentiment. The weekly AAII survey of individual investors saw the percentage of respondents reporting as bullish fall back below 25% this week after rising above 30% last week. While that is not the largest drop in recent months (the second week of January saw bullish sentiment fall 7.9% compared to 6.4 today), it nonetheless reaffirmed that investor confidence is shaky, if not undecided, at the moment.
The drop in bullish sentiment was mostly picked up by those reporting as bearish. Bearish sentiment rose 4.4 % to 45.8%. While that reading is roughly 15% above the historical average for bearish sentiment, the reading is still lower than an even more pessimistic reading only two weeks ago when more than half of respondents reported bearish.
Another week of volatility. A week where the indices were led by the headlines on Russia/Ukraine and the price of crude oil.
S&P500 March11 (www.freestockcharts.com)
S&P500 March11 (www.freestockcharts.com)
The short-term downtrend remains in place, and there is little evidence to assure that the bottom is in. Unless the index stabilizes at this level, the probability for a retest of the 4150 range increases. Below that, S&P 3980-4000 looms.
Investors are experiencing “issue fatigue” with multiple “crises” on a wide range of issues that are weighing on their minds. This backdrop is confirmed showing the current share of voters dissatisfied with the direction of the country is at the highest level in the past 40 years – currently at 82%. It's no coincidence with inflation levels that are also at the highest we have experienced in 40 years.
"This has been the most volatile start of the year since 2009."
With an average intraday trading range of two percentage points, the S&P 500's average intraday range in the first 41 trading days of the year has been the widest since 2009, and the only other year besides 2009 where the average range was wider was 2008.
Not only volatile but frustrating;
So far this year, the S&P 500 has had the second-worst start since 1983, trailing just 2009, when the S&P 500 tanked 25.3% in the first 41 trading days.
That volatility and the challenges investors have faced this year were forecast here in December and reiterated during the onset of this year. The price action in crude oil is also going to play a part in the stock market's short-term direction. Yet another issue for market participants to deal with.
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Just one example of being in the right place at the right time, and why it is extremely important to pay attention to the price action.
“The spread between average YTD stock performance in the Energy and Technology sectors is over 50 percentage points (36.1% vs -17.4%).”
In addition, the small caps and the transports have outperformed the other indices recently and their technical patterns show more sideways action than a downtrend.
Perhaps a sign that the general market is about to stabilize? The Russell 2000 small caps are often a good barometer of what the economy is going to look like down the road. The small-cap ETF (IWM) remains further above its recent lows than the S&P 500 or NASDAQ and has outperformed (SPY) since the start of February.
This could just be due to different allocations and having less exposure to the areas that have been hurt the most, but typically I want to see small caps taking the lead. Recent price action is a positive for the general market and if it continues to outperform and eventually lead during any rallies, then we may finally have seen the bottom.
There was plenty of damage done to the Russell 2000 earlier this year and there is a lot of work to repair that damage. It’s a positive that it hasn't taken another leg down, but it would be nice to see it rally back up.
With Monday's plunge, the NASDAQ made it official entering bear market territory for the first time since the COVID crash. A bear market is defined as a decline of 20%+ on a closing basis without a rally of at least 20% in between. That is the "official" definition, but I define the official change of the PRIMARY BULL trend to a BEAR trend using the long-term trend lines.
In my opinion, the PRIMARY BULL trend is monitored on a MONTHLY closing basis for the index. "Price" has now broken below the trendline and it will be important for the index to recapture that all-important level in the next few weeks BEFORE I reevaluate this situation.
Higher crude oil and gasoline prices, up 50% and >60% respectively over the past 12-months, and we can expect that will eat into discretionary incomes. Even if the Russia/Ukraine war ends quickly, energy prices will likely maintain high due to the other war. The war on fossil fuels.
Earnings forecasts call for the impressive growth of over 20% for 2022 and 2023 for this sector. However, revision trends are falling for 2022, especially for Q1 and Q2. Position in this sector needs to be monitored on a stock by stock basis. I'll take that one step further, that strategy needs to be employed on EVERY position in a portfolio now.
Nothing has changed from my recent assessment of this group. The sector ETF (XLC) has been the weakest sector since late last year and by my definition has now signaled the potential for the beginning of a BEAR market for the group.
Oil prices finally stopped going up. WTI closed at $109 on Friday, down $6 for the week.
Last week's commentary on the Energy complex (XLE);
I wouldn't want to go heavy on oil/energy right here, but I don't think we should stand in the way of such a strong trend either.
After a spike to the $130 level, prices have settled into a range that I had originally targeted at $100-$110. Only a complete reversal in the Ukraine situation would cause WTI to drop back to say the $90 level.
ANY pullback is a major buying opportunity. Especially in the oil companies that are going to pay special dividends based on their cash flow. Those companies will enhance any income portfolio, and provide the chance for appreciation as well.
Energy policies have cemented higher energy prices in place and I simply don't see any major changes being proposed that will reverse this strong uptrend. Well, let me restate that. A global recession turns the tide but that isn't the best outcome for equity investments.
Earnings revisions continue to move higher across the sector while valuation remains attractive. I remain positive on the group’s backdrop given strong credit, improving loan growth, and benefits of higher interest rates. Valuation remains attractive. The sector’s Price/Book ratio is just barely above pre-pandemic levels and long-term averages. On a relative basis, the sector still trades well below the post-credit crisis average.
The headwind; despite higher interest rates, the yield curve is flattening.
Last week I mentioned a trading position that was added to "short" the fixed income market. The Pro shares Ultra Short 20-year Treasury ETF (TBT) was the vehicle of choice. With bonds prices falling as the 10-year rose from 1.74% last week to a closing yield of 2% on Friday, the TBT trade is solidly in the "green". Although it's at short-term resistance, the technical pattern for TBT continues to look constructive.
It has been a difficult start to '22 for this group, and with the MACRO scene now changing I've dropped the sector from Overweight to Equal-Weight. The invasion of Ukraine adds a potential headwind to the global macro view and already slowing PMI data that has shifted my opinion on this manufacturing-exposed sector. A higher U.S. dollar is another headwind.
Earnings revisions are trending lower for 2022 while flattening for 2023. Only the aerospace/defense subsector, is keeping the sector afloat, and since it is the largest weighting in the index at 20%, it can bolster the group for a while longer.
The strength in this sector continues. "Agribusiness" has been in the Savvy portfolio since last year and additional fertilizer stocks were added in late February. The same holds for Uranium which has attracted more attention as the Eurozone energy policy regarding the use of Nuclear power are now being revisited. Uranium ETFs were up 10% while the overall market fell.
My positive remarks concerning the Healthcare Sector ETF (XLV) in early February appear to have been the right call.
In January, Health Care was one of the worst-performing sectors, but it was one of the best in February behind only Energy (on an equal-weight index basis). So far in March, the sector is flat while the S&P is down 4% for the month. Price remains below some key technical levels, but it has already successfully tested support that held since last October.
Relatively speaking the technical picture is among the best looking in the entire market.
"While (GLD) has rallied recently, it's having trouble breaking thru overhead resistance."
That overhead resistance on (GLD) is at $193 and this week's rally ended right at that level. The same holds for the gold miner index (GDX). The recent trend has been strong and impressive but it may be worth waiting for what I see as a pullback in the making before initiating or adding to positions.
Fundamentals can vary drastically at the individual company level, but in aggregate the fundamental outlook continues to improve with positive estimate revision trends offsetting tough comps in 2022. The appreciating U.S. dollar (contributed in part by geopolitical tensions) remains a headwind.
Not much has changed technically in the Materials space. The equal-weight index is still trading in the sideways range it has been in since May. Compared to other areas of the market that isn't such a bad performance.
While the technology ETF (XLK) has NOT violated its long-term trendline it is teetering at support. A chance for the aggressive investors to 'play" for a "bounce". However, I'm not doing much in this sector, except selling call options against positions.
The Philadelphia Semiconductor ETF (SOXX) is also hovering just above long-term support. This sector has led the general market on the way up and led on the way down during this corrective period. At the lows, the SOXX was off 22% from the December highs. It is important for this market-leading sector to not only stabilize but to head higher if we want to see the general market stabilize.
The proxy for "everything speculative", continued to be volatile. For the moment the $55-$60 range is providing support. Any bounce here is merely a rally within the BEAR market trend. Tread lightly.
Bitcoin and Ethereum both bounced off of lows recently and $40k seems to be a decent support level for bitcoin now. Equity market weakness and de-risking across asset classes is the most likely culprit for some of the recent price weaknesses seen in crypto.
Bitcoin has now been below its 200-day moving average for over two months, which is one of the longer streaks on record. While the streak is far from breaking (it’s still ~15% below its 200-Day moving average), once it happens, forward performance from one week to three months out is stronger than average.
The loss of energy independence comes with a price. Instead of lowering dependence on all forms of energy including solar and battery it has been increased. The door for a global recession has been opened.
It appears the EU will be the first to slow down materially, and from there it will be a challenge to keep the damage from spreading. The response to this energy crisis has been shallow and ineffective. Instead, the "talking points" have been ramped up. In that convoluted world, everyone and everything is at fault except for the policies that set this train wreck in motion. That leaves economies and global markets in a very vulnerable position.
That isn't an opinion. The sentiment surveys provide the FACTS that confirm how the 'issues" are being handled. This dangerous mindset in place results in little to no action to resolve the issues. Of course, nothing is set in stone and none of this HAS to occur. A change in course on present policies can alter the course for the very important U.S economy.
It remains to be seen IF that has ANY chance of taking place. I have to place a LOW probability of that occurring anytime soon, and this is one time where I want to be proven wrong.
As I mentioned earlier it matters little what side of the debate an investor is on. The backdrop for continued inflation that stifles growth is firmly entrenched with no solutions offered. This week I revisited my near-term investment strategy and announced necessary changes to clients and members of my service on Tuesday.
When the going gets rough I fall back to the strategy that has allowed me to navigate the difficult markets over time. I have the benefit of "experience". I plan to use every bit of that experience to get through what could be this very difficult period.
Please allow me to take a moment and remind all of the readers of an important issue. I provide investment advice to clients and members of my marketplace service. Each week I strive to provide an investment backdrop that helps investors make their own decisions. In these types of forums, readers bring a host of situations and variables to the table when visiting these articles. Therefore it is impossible to pinpoint what may be right for each situation.
In different circumstances, I can determine each client’s situation/requirements and discuss issues with them when needed. That is impossible with readers of these articles. Therefore I will attempt to help form an opinion without crossing the line into specific advice. Please keep that in mind when forming your investment strategy.
THANKS to all of the readers that contribute to this forum to make these articles a better experience for everyone.
Best of Luck to Everyone!
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INDEPENDENT Financial Adviser / Professional Investor- with over 35 years of navigating the Stock market's "fear and greed" cycles that challenge the average investor. Investment strategies that combine Theory, Practice, and Experience to produce Portfolios focused on achieving positive returns. Last year I launched my Marketplace Service, "The SAVVY Investor", and it's been well received with positive reviews. I've been part of the SA family since 2013 and have correctly called this bull market for over 8+ years now. Winning advice that is well documented, helping investors to avoid the pitfalls and traps that wreak havoc on your portfolio with a focus on Income and Capital Preservation.
I manage the capital of only a handful of families and I see it as my number one job to protect their financial security. They don’t pay me to sell them investment products, beat an index, abandon true investing for mindless diversification or follow the Wall Street lemmings down the primrose path. I manage their money exactly as I manage my own so I don’t take any risk at all unless I strongly believe it is worth taking. I invite you to join the family of satisfied members and join the "SAVVY Investor".
Disclosure: I/we have a beneficial long position in the shares of EVERY STOCK/ETF IN THE SAVVY PLAYBOOK either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
Additional disclosure: Any claims made in this missive regarding specific Stocks/ ETF’s and performance contained in this report are fully documented in the Savvy Investor Service. My Playbook is positioned to take advantage of the bull market with NO hedges in place. This article contains my views of the equity market, it reflects the strategy and positioning that is comfortable for me. IT IS NOT A BUY-AND-HOLD STRATEGY. Of course, it is not suited for everyone, as each individual situation is unique. Hopefully, it sparks ideas, adds some common sense to the intricate investing process, and makes investors feel calmer, putting them in control. The opinions rendered here, are just that – opinions – and along with positions can change at any time. As always I encourage readers to use common sense when it comes to managing any ideas that I decide to share with the community. Nowhere is it implied that any stock should be bought and put away until you die. Periodic reviews are mandatory to adjust to changes in the macro backdrop that will take place over time. The goal of this article is to help you with your thought process based on the lessons I have learned over the last 35+ years. Although it would be nice, we can't expect to capture each and every short-term move.