Weekly Market Insights: 4-28-22 Powell Favors Quick Movement
Building Update: 310 N Ferry St, Lafayette, IN 47901
We are in the late stages of our new office space remodel and it is coming along nicely! Flooring is down, Initial Paint is finished, cabinets are being put in and bathrooms are being completed. Over 4 years of diligent savings and being disciplined on what we wanted is finally coming to fruition!
Last, but not the least of our painful remodel is the front "historically recreated" new front window that has FINALLY arrived (in two parts, thanks to Dave for helping me understand the "why" behind that)! It will be onsite by week's end!!! Having ordered it back in December, it has been a long time coming.
We have chosen to delay our rebalance of our Dynamic Income model out of interest in seeing how Wall Street is going to respond to next week's FED rate increase. They seem poised to increase their projected rate increase from 50 basis points to 75 and to begin their Quantitative Tightening program that will result in tightening financial conditions.
The long-duration corporate bond market had the single worst start to any year in its HISTORY, resulting in a negative 10% loss. This is a direct result of the FED raising rates to combat inflation and explains why every conservative, pension, insurance and protected account structure was dinged this past quarter depending on how much exposure they all had to that part of the bond market.
Numerous investment banks are saying they are expecting a recession to unfold in the next 12-24 months. Our belief is it will begin sooner and potentially last longer than expected.
We are seeing China's Covid policy resulting in complete shut down of cities in China that is sure to increase disruption of the supply chain and possibly lengthen our expected return to normalcy. This is likely to result in a lengthening inflationary period and cause the FED to potentially raise rates higher than what Wall Street is expecting and pricing in at the moment.
Q2 earnings has been sour with companies guidances and forecasts coming in lower than expected. Not sure why it is coming as a surprise to most when it's not to us though.....
We have made shifts to risk assets and portfolios to further reduce market risks and will continue to asset threats and make necessary adjustments as the data warrants. While things may look tough now, this too will pass and before we know it, we will be back on the hunt for opportunities! Patience will prove very beneficial during these periods.
Till we speak again, enjoy your week and the warmer weather!
General Market Commentary
Hawkish comments from Fed Chair Jerome Powell overshadowed many largely positive earnings results, sending stocks lower for the week.
The Dow Jones Industrial Average declined 1.86%, while the Standard & Poor’s 500 dropped 2.75%. The Nasdaq Composite index fell 3.83% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, advanced 0.50%.1,2,3
Focus Comes Off Earnings
With the inflation report in the rearview mirror and a Fed meeting two weeks away, many may have expected corporate earnings to be in focus last week. Comments by Jerome Powell stole the spotlight.
Investors began the week awaiting earnings reports looking for insight into businesses handling the latest inflation, a jittery consumer, tighter monetary policy, and ongoing supply chain issues. Despite one high-profile earnings disappointment, corporate profits appeared better than expected. By the time trading began on Thursday, 17% of S&P 500 companies had reported, and 81% had beaten Wall Street analysts’ estimates. Investors responded positively, sending share prices higher until Powell’s comments on Thursday afternoon triggered selling into the day’s close and accelerated through Friday.4
Powell Unnerves Markets
On Thursday, at an event hosted by the International Monetary Fund, the Fed Chair offered his view that it may be appropriate to move more quickly on raising interest rates. He indicated that a 50 basis point hike was on the table for the Federal Open Market Committee (FOMC).5
His comments also emphasized the need to restore price stability, recalling the successful efforts of former Fed Chair Paul Volker, who used a series of rate hikes to tame the inflation of the 1970s and early 1980s. While some observers anticipated these comments, yields rose, and stocks fell in response.
This Week: Key Economic Data
Tuesday: Durable Goods Orders. Consumer Confidence. New Home Sales.
Source: Econoday, April 22, 2022The Econoday economic calendar lists upcoming U.S. economic data releases (including key economic indicators), Federal Reserve policy meetings, and speaking engagements of Federal Reserve officials. The content is developed from sources believed to be providing accurate information. The forecasts or forward-looking statements are based on assumptions and may not materialize. The forecasts also are subject to revision.
This Week: Companies Reporting Earnings
Monday: The Coca-Cola Company (KO).
Tuesday: Microsoft Corporation (MSFT), Visa, Inc. (V), Alphabet, Inc. (GOOGL), General Motors Company (GM), Archer Daniels Midland Company (ADM), 3M Company (MMM), Texas Instruments, Inc. (TXN), United Parcel Service, Inc. (UPS), D.R. Horton, Inc. (DHI), Chipotle Mexican Grill, Inc. (CMG).
Wednesday: Meta Platforms, Inc. (FB), The Boeing Company (BA), Ford Motor Company (F), Qualcomm, Inc. (QCOM), PayPal Holdings, Inc. (PYPL), Amgen, Inc. (AMGN), ServiceNow, Inc. (NOW), Norfolk Southern Corporation (NSC).
Thursday: Apple, Inc. (AAPL), Amazon.com, Inc. (AMZN), Intel Corporation (INTC), Mastercard, Inc. (MA), Caterpillar, Inc. (CAT), Merck & Co., Inc. (MRK), McDonald’s Corporation (MCD), The Southern Company (SO), Eli Lilly and Company (LLY), Northrop Grumman Corporation (NOC).
Friday: AbbVie, Inc. (ABBV), Exxon Mobil Corporation (XOM), Bristol Myers Squibb Company (BMY), Chevron Corporation (CVX), Honeywell International, Inc. (HON), Colgate-Palmolive Company (CL), L3Harris Technologies, Inc. (LHX).
Source: Zacks, April 22, 2022Companies mentioned are for informational purposes only. It should not be considered a solicitation for the purchase or sale of the securities. Investing involves risks, and investment decisions should be based on your own goals, time horizon, and tolerance for risk. The return and principal value of investments will fluctuate as market conditions change. When sold, investments may be worth more or less than their original cost. Companies may reschedule when they report earnings without notice.
"You don't need a weatherman to know which way the wind blows."
– Bob Dylan
Be On the Lookout for Unemployment Identity Theft Scams
With millions of people receiving unemployment, it’s no surprise that scammers are taking advantage of this situation and filing fraudulent claims for unemployment compensation. They do this by using stolen personal information of taxpayers who haven’t filed unemployment claims.
If you filed for unemployment and received an incorrect Form 1099-G, make sure to contact the issuing agency to request a revised form. You can also contact the IRS and request an identity protection PIN to protect your identity when filing your federal tax return. Make sure to also educate yourself on the many signs of identity theft and take the proper steps to protect yourself.
* This information is not intended to be a substitute for specific, individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax professional.
Tip adapted from IRS.gov6
Tips for Making Cleaning Your Closet Easier
There’s something so satisfying about cleaning out your closest, especially during this time of year. Here are some tips on how to make spring cleaning your closet a little easier.
Not sure what to keep or get rid of? Try the clothes hanger hack! Turn all your coat hangers around so they face away from you and over the course of a month or two, turn the hangers around as you wear your clothes. Then, you can see what you actually wear and clean out your closet accordingly.
Separate your clothes by season and neatly pack away the clothes you aren’t wearing right now for future use. You can use a vacuum sealer to save space. Make sure to label your storage containers or bags so you remember what’s in each one.
Save space by shopping for wardrobe accessories like shoe organizers, slimmer hangers, or necklace/scarf organizers.
Tip adapted from Who What Wear7
Wilson, Xavier, Yolanda, and Zach are standing in line at the market. See if you can figure out their order from these clues: Yolanda is between Wilson and Xavier, Zach is next to Wilson, and Xavier is not first.
Last week’s riddle: How much dirt is in a 2-foot diameter hole that is 4 feet deep? Answer: No dirt at all. You have made a hole by digging out the dirt, so the hole is empty.
The Incan citadel of Machu Picchu, high in the Andes Mountains, Peru.
Footnotes and Sources
1. The Wall Street Journal, April 22, 2022
2. The Wall Street Journal, April 22, 2022
3. The Wall Street Journal, April 22, 2022
4. CNBC, April 21, 2022
5. CNBC, April 21, 2022
6. IRS.gov, February 24, 2021
7. whowhatwear.com, March 19, 2020
Investing involves risks, and investment decisions should be based on your own goals, time horizon, and tolerance for risk. The return and principal value of investments will fluctuate as market conditions change. When sold, investments may be worth more or less than their original cost.
The forecasts or forward-looking statements are based on assumptions, may not materialize, and are subject to revision without notice.
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