Weekly Economic Update: April 25th 2022

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Newsletter - 25 - 04 - 22

 

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April 25th, 2022

Author: SteelPeak Wealth –  Institute of Portfolio Management

This year continues to be a challenge for investors across most asset classes; a stark contrast from what we have enjoyed the last three years. This shouldn’t be a surprise, and certainly is no reason to panic. Keep in mind, the current bull market that started in March 2020 is still one of the strongest on record. The S&P 500 has gained 90% over the last 25 months. The only periods that generated better 25-month returns were following the Great Depression, the end of the Korean War, and the 2008 financial crisis.

The stock market does not normally double in a span of two years. Following periods of such strong returns, we often see periods of consolidation as the market digests the recent gains. Long-term investors should manage expectations and avoid allowing recency-bias to impact decisions. It is natural for our expectations of the future to be shaped by the recent past, but it is also one of the most common mistakes investors make.

The Fed has been talking tough about the need to raise rates to address the recent spike in inflation. On Thursday last week, Jay Powell reiterated the Fed’s intention and essentially ensured the Fed will raise rates by 0.50% at their meeting next week. The market continues to price in more rate increases than the Fed has laid out in their own projections. During the press conference following next week’s meeting we will get an update on the Fed’s expected path of interest rates.

Keep in mind that the Fed is chasing inflation. The price of crude oil is considered one of the best leading indicators of inflation because it feeds into so many products. Any product or service that requires transportation is influenced by the price of oil. Following the invasion of Ukraine, crude oil spiked during the month of March (red box in chart below) which fed into the record high inflation we saw last month. Now, crude oil prices have moderated, which should translate into lower rates of inflation, and potentially a less aggressive Federal Reserve.

 

First quarter earnings season is off to a strong start. According to FactSet, 79% of companies that have reported earnings that have beaten analyst estimates. This week we get a slew of earnings from some of the largest companies including Apple, Microsoft, Amazon, Facebook, and many others. Most of the focus will be on the guidance that management teams provide for the rest of the year.

While corrections are painful, they are the price investors pay to eventually be rewarded when the market doubles in two years. Below is a year-to-date chart (left) and a 10-year chart (right) of the S&P 500. Achieving the long-term returns we have seen over the last 10 years requires investors to endure some short-term corrections. Those who are patient and disciplined will continue to be rewarded over the long-run.

 

 



T I P   O F   T H E   W E E K


Some small business owners don’t have succession plans. If you haven’t created one, now is as good a time as any to start. This may not only enable continuity, but also address some legacy-strategy issues.

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THE WEEK AHEAD: KEY ECONOMIC DATA

Tuesday: Durable Goods Orders. Consumer Confidence. New Home Sales.

Thursday: Gross Domestic Product (GDP). Jobless Claims.

Friday: Consumer Sentiment.

Source: Econoday, April 22, 2022 The Econoday economic calendar lists upcoming U.S. economic data releases (including key economic indicators), Federal Reserve policy meetings, and speaking engagements of Federal Reserve officials. The content is developed from sources believed to be providing accurate information. The forecasts or forward-looking statements are based on assumptions and may not materialize. The forecasts also are subject to revision.

 

THE WEEK AHEAD: COMPANIES REPORTING EARNINGS

Monday: The Coca-Cola Company (KO).

Tuesday: Microsoft Corporation (MSFT), Visa, Inc. (V), Alphabet, Inc. (GOOGL), General Motors Company (GM), Archer Daniels Midland Company (ADM), 3M Company (MMM), Texas Instruments, Inc. (TXN), United Parcel Service, Inc. (UPS), D.R. Horton, Inc. (DHI), Chipotle Mexican Grill, Inc. (CMG).

Wednesday: Meta Platforms, Inc. (FB), The Boeing Company (BA), Ford Motor Company (F), Qualcomm, Inc. (QCOM), PayPal Holdings, Inc. (PYPL), Amgen, Inc. (AMGN), ServiceNow, Inc. (NOW), Norfolk Southern Corporation (NSC).

Thursday: Apple, Inc. (AAPL), Amazon.com, Inc. (AMZN), Intel Corporation (INTC), Mastercard, Inc. (MA), Caterpillar, Inc. (CAT), Merck & Co., Inc. (MRK), McDonald’s Corporation (MCD), The Southern Company (SO), Eli Lilly and Company (LLY), Northrop Grumman Corporation (NOC).

Friday: AbbVie, Inc. (ABBV), Exxon Mobil Corporation (XOM), Bristol Myers Squibb Company (BMY), Chevron Corporation (CVX), Honeywell International, Inc. (HON), Colgate-Palmolive Company (CL), L3Harris Technologies, Inc. (LHX).

Source: Zacks, April 22, 2022 Companies mentioned are for informational purposes only. It should not be considered a solicitation for the purchase or sale of the securities. Investing involves risks, and investment decisions should be based on your own goals, time horizon, and tolerance for risk. The return and principal value of investments will fluctuate as market conditions change. When sold, investments may be worth more or less than their original cost. Companies may reschedule when they report earnings without notice.

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Q U O T E   O F   T H E   W E E K

 

“You don’t need a weatherman to know which way the wind blows.”

BOB DYLAN

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T H E   W E E K L Y   R I D D L E

Wilson, Xavier, Yolanda, and Zach are standing in line at the market. See if you can figure out their order from these clues: Yolanda is between Wilson and Xavier, Zach is next to Wilson, and Xavier is not first.

 

LAST WEEK’S RIDDLE: How much dirt is in a 2-foot diameter hole that is 4 feet deep?

ANSWER: No dirt at all. You have made a hole by digging out the dirt, so the hole is empty.

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SteelPeak Wealth –

Institute of Portfolio Management

For more financial news and resources, visit our Insights page ⇒

 


 
Steel Peak Wealth Management, LLC (“SteelPeak Wealth”) is an SEC registered investment adviser located in California. There is no guarantee that any views, projections and/or opinions expressed herein will come to pass. This report should not be construed by any prospective investor as SteelPeak Wealth’s rendering of any personalized investment advice. Information on the registration status of SteelPeak Wealth is available at www.adviserinfo.sec.gov. A copy of SteelPeak Wealth’s current written disclosure brochure is available upon written request.
Investing involves risks, and investment decisions should be based on your own goals, time horizon, and tolerance for risk. The return and principal value of investments will fluctuate as market conditions change. When sold, investments may be worth more or less than their original cost.
The forecasts or forward-looking statements are based on assumptions, may not materialize, and are subject to revision without notice.
The market indexes discussed are unmanaged, and generally, considered representative of their respective markets. Index performance is not indicative of the past performance of a particular investment. Indexes do not incur management fees, costs, and expenses. Individuals cannot directly invest in unmanaged indexes. Past performance does not guarantee future results.
The Dow Jones Industrial Average is an unmanaged index that is generally considered representative of large-capitalization companies on the U.S. stock market. Nasdaq Composite is an index of the common stocks and similar securities listed on the NASDAQ stock market and is considered a broad indicator of the performance of technology and growth companies. The MSCI EAFE Index was created by Morgan Stanley Capital International (MSCI) and serves as a benchmark of the performance of major international equity markets, as represented by 21 major MSCI indexes from Europe, Australia, and Southeast Asia. The S&P 500 Composite Index is an unmanaged group of securities that are considered to be representative of the stock market in general.
U.S. Treasury Notes are guaranteed by the federal government as to the timely payment of principal and interest. However, if you sell a Treasury Note prior to maturity, it may be worth more or less than the original price paid. Fixed income investments are subject to various risks including changes in interest rates, credit quality, inflation risk, market valuations, prepayments, corporate events, tax ramifications and other factors.
International investments carry additional risks, which include differences in financial reporting standards, currency exchange rates, political risks unique to a specific country, foreign taxes and regulations, and the potential for illiquid markets. These factors may result in greater share price volatility.
Please consult your financial professional for additional information.

Certain information contained herein has been provided by, or obtained from, third party sources. While SteelPeak Wealth believes that such sources are reliable, it cannot guarantee the accuracy of any such information and does not represent that such information is accurate or complete.
CITATIONS:
1. The Wall Street Journal, April 22, 2022
2. The Wall Street Journal, April 22, 2022
3. The Wall Street Journal, April 22, 2022
4. CNBC, April 21, 2022
5. CNBC, April 21, 2022

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