April 29, 2022



                                                             Week Ended April 22nd, 2022

• Stocks remained under pressure this past week, pressure which accelerated late in the week after a slew of comments from Federal Reserve Members suggested that interest rate hikes will be coming fast and furious.  Although possibly short-term negative, we view this as intermediate- and long-term positive as it will help investors regain their confidence in the ability of the Fed to engineer a soft landing.  We are cautiously optimistic but continue to believe that unlike recent pullbacks, the recovery from this one will be more of a process rather than an event.

In addition to the normalization of monetary policy, inflation caused by the COVID and war induced disruption of supply chains as well as inflation will remain front and center and bears watching.

• Investor Sentiment remains near its lowest level in 30 years.  However, according to the American Association of Individual Investors (AAII), “historically, the S&P 500 index has gone on to realize above-average and above-median returns during the six- and 12-month periods following unusually low readings for bullish sentiment.”

• Consumer Nondurables appear fully valued at best should be the Fed be minimally successful in avoiding a protracted recession.

• Earnings from tech behemoths are on deck this coming week (see below).  These include the likes of Microsoft (MSFT), Apple (AAPL), Alphabet (GOOGL), Meta Platforms (FB), Amazon (AMZN) and Intel (INTC).  The earnings but more important their outlook could go a long way to determine the short-term direction of stocks.

• Can we blame at least some of the volatility on the fact that this is a Mid-Term Election Year?  Quite possibly as according to statistics gathered by U.S. Bank and published on March 4, 2022, the average return of the S&P 500 during the year of the midterm through October 31 was 0.3%.  During non-midterm years the rate of return averaged 10.7%.  Furthermore, from November 1 of the midterm year through October 31 of the following year the S&P 500 rose by an average of 16.3%.  As an aside, please note that during each of the 16 periods following the midterms noted above, the S&P 500 was always higher.

• Shares of Netflix (NFLX) tumbled as the numbers of subscribers to its streaming services fell 200,000 during the past quarter and are expected to drop another 2,000,000 this coming one.  The stock which peaked at ~$700/share within the past year closed Friday at $215.52.  Shares will most likely remain near these levels until the number of subscribers levels off, it can begin to charge some of the approximately 100,000,000 freeloaders or it can develop an ad support streaming service for lower-tier subscribers.

• The Vanguard Balanced Index Fund (VBAIX), somewhat of a proxy for balanced investors has fallen 10.34% year-to-date as, in addition to the pullback in stocks, bonds remain under pressure.

• U.S. mortgage rates have move higher in conjunction with the above noted fed rate hike with the thirty-year mortgage rate closing Friday at 5.11% while the 15-year fixed and 5/1 Adjustable stood at 4.38% and 3.75%, respectively.

• For obvious reasons noted above, at this time, we expect 0.50% hike in the Federal Funds rate following the May3-4 meeting of the Open Market Committee of the Federal Reserve as well as at least this amount at the two subsequent meetings ending June 15 and July 27.  We also expect this not to be a market moving event as most have already priced this in.

• Several important reports regarding the current state of the consumer are released this week, to include:  On Tuesday, March Orders for Durable Goods, April Consumer Confidence and March Sales of New Homes; Wednesday, March Wholesale Inventories; Thursday, the Weekly Report of Initial Claims for Unemployment Insurance and the Initial Estimate of Q1 GDP; and on Friday, March Personal Income and Spending and April Consumer Sentiment.

• The corporate earnings season continues in full swing as the upcoming week is chock full.  Expect reports from Coca-Cola (KO), Pepsico (PEP), General Motors (GM), Chipotle (CMG), UPS (UPS), General Electric (GE), Microsoft (MSFT), Alphabet (GOOGL), Boeing (BA), Ford (F), Humana (HUM), Kraft Heinz (KHC), Visa (V), Novartis (NVS), Meta Platforms (FB), Apple (AAPL), Amazon (AMZN), Thermo Fisher (TMO), Merck (MRK), Twitter (TWTR) Caterpillar (CAT), Northrop Grumman (NOC), Domino’s Pizza (DPZ), PayPal (PYPL), Comcast (CMCSA), Mastercard (MA), Intel (INTC), Eli Lilly (LLY), Chevron (CVX), Abbvie (ABBV), and Exxon (XOM).

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