Trade The Journey

Trade The Journey

Short Post

Top of the Morning! I hope all is well. Markets had a shortened week due to Good Friday. Last night, Errol Spence defeated Yordenis Ugas by stoppage and called out Terrance Crawford in the post-fight interview. I am excited about the possibility of this matchup occurring.

The best fighting the best to become the undisputed middleweight champion. The Nba playoffs also started this weekend and the games have been exciting although there were two blowouts yesterday.

The war in Ukraine wages on, with both the Ukrainian and Russian presidents stating that talks have reached a dead end. It’s hard to believe that this conflict has been going on for nearly two months with no end in sight.

China continues its lockdown to try and quell the coronavirus outbreak in Shanghai. Shanghai is a large city and also one of China’s busiest ports. Residents in the city are growing agitated with China’s zero-tolerance policy as food shortages take hold in the city.

Shanghai has over twenty million residents. Things have gotten so bad in the city, that its residents have resorted to bartering. President Xi who is seeking a third term is primarily focused on eliminating the threat of the Coronavirus but residents of Shanghai feel differently about the measures taken by Xi resorting to protests.

China is also facing a slowdown in growth and will need to keep lowering its rates to help spur demand.

Elon Musk turned down the offer Twitter extended to join its board and instead began the process of a hostile takeover. Musk believes that improvements can be made to the Twitter platform. Musk offered 43 billion for the purchase of Twitter which means close to $54.20 per share. To prevent the takeover, Twitter plans to offer shareholders the chance to purchase the shares at a discount, diluting the number of shares available thus making the takeover more expensive.

Musk is also proposing a stock split for Tesla to be voted on in the shareholder meeting in June. The stock split will follow the trend of companies like Apple and the latest, Amazon, in a bid to make their shares more affordable for the average investor.

Here in the United States inflation continues to run high. The latest CPI report stated that inflation increased 1.2% in March. This brings the yearly inflation level to 8.5%. Gasoline increased by 18% and Fuel oil increased over 20% in March.

Although “food at home” increased by 0.1% from February to March, it has risen 10% over the year. “Food away from home” rose close to 7% over the year. Used car and trucks prices have fallen in the last couple of months but have risen over 20% over the year.

The indexes mentioned above are purchases that almost all consumers need to make on a day-to-day basis except for used cars and trucks. Producers and small businesses are also feeling the inflationary pressures.

PPI increased by 1.4% in March and by 11.2% from the previous year in Final Demand. Diesel Fuel prices rose over 20%. For final demand goods, prices rose for gas, vegetables, jet fuel, iron, steel, and electric power. For final demand services, prices rose for truck transportation of Freight, travel services, hardware, building materials, and supplies retailing.

Inflation overtook labor quality as the number one concern for small businesses. Business optimism fell for the month. Small business owners were hesitant in the following sections: plans to make capital outlays, expect the economy to improve, expect real sales to be higher, current job openings, and now a good time to expand. The average rate paid on short maturity loans is 5.68%.

Job openings face challenges being filled in the following industries: Transportation, construction, and Manufacturing.

Price hikes in the following industries: Wholesale, construction, agriculture, and retail sales.

Mortgage rates rose over 5%. Mortage applications and refinancing slowed due to the high rates and home supply continues to be a challenge. With the Fed focusing on reducing its balance sheets, markets will be tasked with determining the rates.

Bonds steepened this past week but markets are still concerned about a possible recession. A rate hike of fifty basis points is on the table for the next meeting. With higher rates, growth industries, and to some extent crypto are feeling the pain. Financials should recover as time goes on with higher rates increasing their margins.

The healthcare and utilities sectors backed off their highs while consumer staples and energy reached new highs. The technology and financial sectors continue to struggle. Industrials, real estate, materials, and consumer discretionary sectors drifted sideways for the week.

The beginning of earnings week featured some positive results for the financial companies although Wells Fargo missed on its revenue. A reduction in mortgage lending and a release from its pandemic reserves may have cushioned its fall in earnings. Investors responded negatively to this development.

It seems like inflation remains a top concern for companies and consumers alike. Although the Fed seems focused on reducing inflation, it’s unclear if they will be able to do so without causing a slowdown in economic growth.

Looking for companies with a solid brand and the ability to pass on their increased costs to the consumer might be an optimal strategy moving forward. No one knows how long the war in Ukraine will last and what escalation Russia may take to be victorious.

With the Nasdaq in bear market territory and the indices holding on to small gains, the markets are reflecting the increased sense of risk in the economy.

Below are some charts of the indices and levels that should be watched in the week ahead.

Russell 2000:

S&P 500

Dow Jones

Nasdaq


Past week’s Cash flow report:

I feel good about the purchases made this past week although inflation continues to hinder my purchasing power. This week should be a bit calmer in terms of expenses and I should be able to continue building up my savings account. I am optimistic about the week ahead.

Grade: C
Reason: Continued improvement

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