Edition #6
Monday November 7th 2022
This Week in History 📰
7th November 1872- The Mary Celeste Set Sail From New York
8th November 1960- John F. Kennedy Elected President
11th November 1911- The End of WW1.
Major Events This Week 🔬
US Midterm Elections- Tuesday
CPI Inflation Data- Thursday
The COP27 Climate Change Summit Begins in Egypt
Summary 📝
We nearly had them last week! Bullish sentiment was awash as a WSJ article suggested the Fed was ready to pivot their strategy, taking into account the lagging of inflation data, meaning they might be willing to slow the pace of their interest rate hikes soon.
Alas, Fed Chair J.Powell smacked such rhetoric down on Thursday in his post FOMC press conference, suggesting the Fed were a long way off such a move, and that inflation was still not meaningfully coming down.
Such a response should not be a huge surprise if you’ve seen his other conferences, where he has suggested it would be far better to overdo the tightening in the economy, and then ease the pressure, than to do too little.
This week also sees the Midterm Election results in the US, with Joe Biden’s 42% approval rating likely to result in some movement in the ownership of the House and Senate.
However, the stock market loves to see a government in gridlock, where radical and unstable policy is unlikely to pass. This means that companies and investors can rely on some level of political stability, and plan ahead.
We see more tech layoffs coming this week, as Meta looks to lay off thousands of workers, and may get further insights into how companies are feeling the heat of interest rate hikes and slowing demand in more earnings reports to come, such as Palantir, Occidental, Disney, Roblox and AstraZeneca to name a few.
Market Recap 📈
Post of the Week 💌
❗️ Midterm Markets 👇
✅ Midterm elections take place in the next week in the US, with Democrats looking to hold onto the Senate and House during low approval ratings, and turbulent economic conditions. 🗳️
✅ Surprisingly, the midterms are usually a positive catalyst for markets, as a newly elected group rides a wave of positivity on a fresh mandate. 🥳
What’s Moving Markets?
Incoming Earnings Reports this week- provided by Earnings Whispers.
Events today- provided by Unusual Whales.
CNBC-Goldman Sachs says China is still ‘months away’ from reopening
“The actual reopening is still months away as elderly vaccination rates remain low and case fatality rates appear high among those unvaccinated based on Hong Kong official data,” Goldman Sachs said in a note.
The firm estimates that a full reopening could bring a 20% rally in the Chinese equity market, a separate note said.
CNBC-Meta could begin large-scale layoffs this week, report says
Meta could begin to carry out large-scale layoffs as soon as Wednesday, according to a report from the Wall Street Journal.
The layoffs are expected to impact thousands of employees, the report said.
Chart of the Day 📈
We hear the phrase “cash is king” a lot when markets are uncertain, and people don’t want to put any of their hard-earned savings at risk. However, even with inflation eating away approximately 10% of purchase power, staying in cash was probably the right move in 2022!
The big question is; what’s next?
Do we have further to go, or with markets being forward thinking, is the worst behind us?
My personal sense is that once we see a drop in inflation, this will likely continue fairly severely until we reach a point where no further declines are likely. What the Fed decides to do at this point will be critical, whether they persist with crushing demand to reach their 2% inflation target, or settle for a more realistic near-term goal.
The Midterm elections suggest we may have some bullish times ahead, so in the near term I hope to take advantage of some bear market rallies to sell some more positive stocks, and then keep cash ready for the inevitable dips we’ll see as uncertainty continues.
Investor’s Toolkit ⚒️
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Disclosure
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This newsletter provides general information only. Before making any financial or investment decisions, please consult a financial planner to take into account your personal investment objectives, financial situation and individual needs.