Investing Update: Peak Uncertainty
Investing Update: Peak Uncertainty
What I'm buying, selling & watching
The inflation number on Tuesday came in at 8.3%. That was higher than the consensus of 8% and it crashed another stock market rally. After the number was released the market tumbled and finished out the week down 5.78% from the number release.
It signaled that inflation is stickier than many thought and indicated that rates still need to go higher. Further tightening by the Fed is coming.
Here is where inflation stands for both the CPI number and Core CPI number.
Below is a great chart that shows the year-over-year changes for both July and August. You can see what sectors are seeing rising or declining inflation.
Then to make maters worse, Thursday after the bell FedEx (FDX 0.00%↑) issued a statement on weakening global demand and their plans to significantly cut costs. The CEO indicated that he expects a worldwide recession. That news sent the S&P 500 right through the important level of 3,900 on Friday. It closed the week at 3,873.
It was FedEx’s worst day since their IPO in 1978. Down 21.40% on the day.
The Transcript broke out FedEx’s cost-cutting plans below. These type measures from a company like this does signal the warning for a possible earnings recession.
This will continue to be talked about as it’s important to the overall global outlook on the market impact, earnings and one way to get a gauge where things are heading. FedEx has direct connection to many companies and it’s a way to tell what consumer consumption could show.
Now is this a FedEx only issue, or does this signal a more macro issue? The market’s reaction to the news suggests this is a macro issue. It hints at a slowing global economy, further strengthening the bear case that we’re heading lower. It could bring bad economic weakness which is followed by profit weaknesses from companies, which has not been seen yet. Those type results would likely send us through the June lows and cause for concern moving forward in the short term. We really are in the midst of peak uncertainty.
Nobody Knows For Sure
After listening to Jeffrey Gundlach speak at Future Proof, there was one sentence he said which really stuck out to me.
Nobody knows for sure what the market is going to do.
That really echoes the thoughts that nobody really knows what the market will do in the coming days, weeks, months, years etc. Anyone that says otherwise or is giving their market “prediction” is just making their best educated guess.
That’s the beauty of the market. Nobody knows. Everyone is assuming and guessing based off what they think they know.
The next time you think you know what the market is going to do, think of what Gundlach said above, and the popular quote from Warren Buffett below.
We haven't the faintest idea what the stock market is gonna do when it opens on Monday — we never have.
Millennials Are Selling
Over the past 12 months millennials have sold stocks faster than any other generation. This is really the opposite of what history tells us they should be doing. When stocks have sold off and get cheaper, is the time to buy, not sell. Especially with a time horizon of 30+ years. It’s time in the market, not timing the market.
2022 Returns In One Chart
This may be the best chart I’ve seen regarding 2022 returns. To the left are the returns for bonds and on the bottom the returns for the S&P 500. It illustrates just how brutal this year has been for both bonds and stocks. 2022 is just a gigantic outlier through August compared to other years since 1976.
Moves I’ve Made
I added to my S&P 500 index (VFIAX) holding on Friday as the S&P 500 went below 3,900. This was a dip that I felt like buying. As we trend toward revisiting the June lows, that’s the next buying point where I will look to add again.
Uber (UBER 0.00%↑) I added to my position in Uber at $31.25 a share. This stock is in an uptrend and has been holding the gains since it reported the ability to be profitable quicker than expected. It sold off a bit on a cyberattack report Friday and that is when I decided to buy more of it. After using Uber constantly in California, I’ve found the product is better than ever. It is more expensive to ride, but the ease, convenience and simplicity of use shines.
Generac (GNRC 0.00%↑) I added to my position in Generac at $200 a share. This stock has not performed the best. When I started my position I was anticipating it going a bit lower and indicated I would buy more. I’ve done so and I'm at the position weighting I want in this stock. I’ll have a stop loss in this name probably around $175 to limit my downside risk, since this is a newer position of mine.
The Coffee Table ☕
Sam Ro wrote a good post this week entitled, Most pros can’t beat the market. He shows some data on just how hard it is for active managers to beat the S&P 500. Sam does a great job writing the TKer. After spending some time with him at Future Proof, he’s an even better guy. Be sure to check out his work.
Darius Foroux did an interesting post about one thing that doesn’t change about the stock market is human behavior. Why Investor Behavior Never Changes. It’s an interesting observation worth reading.
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Disclaimer: This is not investment advice. You should not treat any opinion expressed as a specific inducement to make a particular purchase, investment or follow a particular strategy, but only as an expression of an opinion. Do your own research.