July 3, 2022
Weekly Market Outlook
By Keith Schneider and Donn Goodman
First off, before we get to the UGLY markets and economic backdrop, we wanted to wish you and your families a Happy Independence Day holiday weekend.
Without our freedoms, which include free market capitalism and the right of every investor to play on a fair and level playing field, we would not have the numerous diversified investment opportunities in the public markets that we have today. We hope you enjoy your Fourth of July!!!
Fireworks In the Current Markets
As all our regular readers and subscribers know well, our position has been that the stock AND bond markets have stunk since the beginning of the year.
The tug of war as to whether or not we are already in a recession is part of the daily chatter by the media, Wall Street analysts, and every economic commentator.
However, "in or not yet in" a recession doesn't really matter to investors who have experienced the worst market since 1970.
We're with you if you're feeling that way.
Just how bad?
The unprecedented decline in both the stock and bond markets has wiped $15 trillion in wealth out of the US markets in 2022.
We humbly suspect that every investor has, in some way, felt the effects of this decline.
Long-term vital retirement plans, corporate balance sheets, and numerous industries (banking, brokerage, insurance, technology, etc.) are feeling the effects of falling asset prices and higher interest rates.
In June alone, the S&P 500, the Dow, the NASDAQ 100, and the Small-Cap indices were all down over 8% for the month. It wasn't pretty.
Fortunately, it's halftime, and this can create an opportunity for change.
Like in many sports, we'd be crazy to assume at halftime in the Super Bowl, in the 7th inning of a World Series game, at the final turn of the Kentucky Derby, at the turn of the Masters, etc, the leader would be the winner of the game.
It's time to approach the second half of the year with a rational and confident perspective that acknowledges the ugly first half of the game (year), and use it to prepare for the remainder of the year to win the game.
First, let's take a few moments to reflect on the numerous (and often) times we pointed out to "take cover, raise cash, move to commodities and value stocks, shorten fixed income duration and avoid listening to the media, other pundits and especially (and most of all) any financial advisor suggesting you stay the course.
As a brief history lesson, let us go back to November 21, 2021 right before Thanksgiving when we wrote, "Something Stinks". We said "With inflation rising at an accelerated rate and disruptions in the supply chain creating shortages and enhanced demand, everything including milk (baby formula) cars, food products, paint, lumbar, gasoline and especially Turkey are rising at double digit rates, which will eventually wreak havoc in our society. These rising costs are going to (if not already) impose a substantial tax on every American just through their everyday purchase".
Has it gotten better?
Absolutely not. If anything, the past 2 months have certainly exacerbated our thesis from last Thanksgiving.
We will also likely continue to see wild market swings, heavy and frequent sector rotation, pressure on interest rates, and more scarcity and shortages in everything from food and power to gasoline.
We Take This Seriously
We value you, our readers, subscribers, and friends. We are most sincere when we say that we operate a company that strives to make your financial life better. We also want you to feel more secure about your investments, have peace of mind, and have a workable plan for the future. Stating the truth, being open and transparent, and making your life better is our core mission, and we take it very seriously.
For 2022 that means minimizing the losses and helping to provide better ideas and strategies than you'd find in the top 10% of all newsletters and money managers in the US. Do you realize that at the end of June, we have 5 investment strategies that are positive for the year thus far? I think you would agree that is HUGE!
A Midyear Recap of Recent Guidance
Let's draw upon some of the suggestions and direct guidance we've given since then. We believe that every one of these would still be useful to put in place if you haven't done so already:
In our Market Outlook, "10 suggestions to thrive during the Mother of All Supply Chain Shocks," on January 16, 2022, we said:
On February 13, 2022, we wrote, "The Heat is On." In it, we suggested commodities have emerged as a good bet in these times. If you are a subscriber, you know that many of our mechanical investment strategies were then (and still are) invested in energy, including oil field services, natural gas, and agricultural ETFs. Mish was also investing in Sugar and Wheat ETFs and Oil and made good profits for her subscribers.
In the article "Do You Have An Investment Drawbridge," on April 24, 2022, you would have seen our direct suggestions to make sure you include CASH as one of your most important asset classes. We also suggested if you own stocks with a low-cost basis, you consider selling some or all of the shares to preserve capital. We said, "Far better to pay the IRS than Mr. Market." How many of you were willing to take that action? Mr. Market can be ruthless. DO NOT BELIEVE people when they tell you, "It will come back." It took from 1973 to 1982 for many stocks to come back the last time we saw this kind of inflation/stagflation.
On February 20, 2022, when we discussed the "Big Mac Barometer" and how expensive food products had become, we said, "Consider adding some precious metals and mining in your portfolio." We admit gold and silver have done very little since then. But guess what, you would not be down 20% on the year as both of them held their own, and you would have been flat on that investment from February 20.
Recently (June 5, 2022), before the ugly June 8-10% sell-off, in our Outlook titled, "Economic Storms Ahead? What To Do To Protect Your Investments," we suggested what you can do to protect your portfolio, which included the following:
Taking Action
"I love quotes… but in the end, knowledge has to be converted to action or it's worthless." — Tony Robbins
As we move into the second half of the year, we don’t see any fundamental reason to believe that the trend of the market will change.
However, as we taught this week’s Complete Trader webinar, and as Mish will teach in an upcoming StockCharts event, and as we’ll discuss here in the coming weeks, July is often a pivotal month.
Like January (i.e. this year), and the sports analogies mentioned above, July can mark a change in the game that can result in a reversal or a consolidation that leads to another expansive phase lower.
So we don’t expect an uneventful summer, but there are ways we can help you have a more relaxing summer…
In every Market Outlook we have written since the beginning of the year, we made three bold statements, which we urge you to heed today:
Market Insights from our Big View service:
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