Trade The Journey

Trade The Journey

Short Post VIII

Top of the Afternoon! I hope everyone enjoyed their weekend, I surely did. This past weekend, I made a trip to Monterey to visit a friend/mentor. Monterey is a beautiful city. I found the trip to be refreshing as it wasn’t as crowded or busy as the typical Los Angeles area.

There are a lot of places for tourists to visit and most of the things to do are either near or directly on the beach. Seeing the clear water and white sand brought some tranquility to my spirit. All the cities are connected along the pier, five minutes in one direction and you’re in Carmel, another five minutes in a different direction and you’re at Pebble Beach.

Unfortunately, I couldn’t see all the sights that I had hoped to see. I wish I would have stayed an additional day, allowing me a full day to explore. It’s a six-hour drive from Los Angeles to Monterey and a nearly eight-hour trip if you decide to travel along the coastline.

It was nice visiting my mentor and his wife, as they are up there in age and moving to another state next week. It’s been ten years since I’d seen him face to face. As always, I learned a lot and feel that I still have a lot more to learn about business and life. One shining moment for me, was him asking me about my perspective on the markets and some possible areas in the market for investment.

I met my friend/mentor through the Entrepreneurship Mentorship program at Fresno State. It’s a program for students to learn about Entrepreneurship through experiences and mentoring given by the area’s business leaders. One of the benefits of the program besides being paired with a business leader is the psychological/personality test given by a prominent testing facility. These tests cost about $4,000 a person.

Needless to say I learned a lot about myself through this test.

After a long trip, I’m in need of some relaxation so this post won’t be long.

Short Market Review:

The latest credit report shows that the use of credit remains elevated. Although credit use declined from the previous month it remains high on the year, nearly matching the highs in 2010.  Consumer credit outstanding exploded after the Pandemic lockdowns ended, reaching its highest level in four years.

Mortgage Applications decreased, as did the refinance and purchase applications index. Housing inventory remains tight, and rates held steady above five percent. Prospective home buyers still face challenges in finding and affording a home. Rising home prices aren’t the only challenge prospective home buyers face.

Consumers are facing stubbornly high inflation that has yet to cool down. In fact, inflation resumed its rise after falling in April. Nearly all the price indexes increased over the last month. The grocery store food index rose overall with the food at home index increasing 11.9% in the past year. The energy index resumed its rise, as did the gasoline index. The CPI while trending higher overall, fell on all items less food and energy.

Unfortunately, food and energy represent most of the purchases consumers make daily. Analysts were hoping that inflation was nearing peaking but that doesn’t seem likely anytime soon.

According to the report, the largest increases in the CPI report were shelter, airline fares, used cars and trucks, and new vehicles.

The wholesale inventories report showed that sales were up 0.7% and inventories were up 2.2%. Durable goods sales were up from the previous month slightly at 0.5%. Automotive, Lumber, Professional equipment, and Metals sales were down this past month. The largest decrease in sales was in Computer Equipment.

Nondurable goods sales also increased but showed slow growth from the previous month. The largest decrease in sales was in Apparel.

Durable goods inventories rose again but its growth slowed from the previous month nearly across the board. Nondurable goods inventories fell from the previous month. Apparel inventories and paper rose the most from the previous month. Grocery inventories although it grew, slowed in growth from the previous month.

Supply chain concerns remain, and prices continue to bite into the consumers’ wallets. China’s battle with Covid has continued to weigh on supply chains evidenced by the trade balance in which imports fell. Consumer sentiment continues to fall. The index fell for current economic conditions and consumer expectations. The expected interest rates a year from now rose 0.1%.

Gas prices show no signs of slowing down. I can attest to this fact, as I spent nearly $340 dollars on gas on the trip to Monterey. My gas expense for the trip neared my expense for a hotel room for the weekend. According to the report, National gas prices rose sixty-five percent from the previous month. Consumers’ assessments of their financial conditions continue to worsen, and inflation is a top contributor to this negative outlook.

The indices likely fell on the news of stubbornly high inflation. While the Nasdaq is in bear market territory, the S&P 500 is nearing bear market territory. Nearly all the indices gapped down to the end of the week. The five-year yield eclipsed both the ten-year and thirty-year yields as the bond market faced a sell-off in the five and ten-year bonds. All of the sectors gapped down to end the week with the exception of the energy sector.

With the Fed forecasting rising rates to battle inflation, the possibility of an incoming recession is growing more likely. Across the world, countries are tightening rates and removing pandemic accommodations from the market. With the exception of Japan, advanced economies around the world are battling inflation.

Expect continued volatility and indices to test new lows. I wouldn’t dare call a bottom to the market at this point. With the heightened volatility this is an opportune market for traders. Investors can play the market by looking for bargains because in the long-term the markets will recover.

This past week:

I was able to have enough money to enjoy the trip but I face some challenges ahead. This coming week I plan on cutting back my expenses even further to help me recover from expenses incurred on this trip.

Grade: C-

Reason: Continued challenges ahead.

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