Weekly Economic Update: March 14th, 2022

ALL
BLOG
VIDEO
NEWS
PRESS
FAQ
Newsletter - 14 - 03 - 22

 

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

 


 

March 14th, 2022

 

This week, the Fed is widely expected to raise interest rates for the first time since December 2018. With so much attention on inflation, markets will be looking for clues as to how many times the Fed plans to raise rates this year.

Last week’s inflation reading showed consumer prices rose 7.9% over the past year through February. Unfortunately, the recent spike in gas prices has largely occurred during March, and thus are not reflected in the last week’s report. Unless oil prices reverse quickly, we expect to see higher inflation readings in the months ahead. While our elected officials try to point blame at the current situation in Eastern Europe, high inflation readings started back in 2020. Below is a graph of monthly inflation readings going back 10 years. The red circles mark spikes in inflation that came within months of the passing of the CARES Act in March 2020, and the American Rescue Plan in March 2021.

From an investment standpoint, the “logical” conclusion would be to invest in those companies that benefit from inflation, namely energy and material stocks. The problem is what is logical today is likely already priced into financial markets. Below is a graph of the year-to-date performance of XLE (Energy Sector ETF), XME (Metals & Mining ETF), and SPY (S&P 500). While the broad S&P 500 is down 11%, energy and metals are up 38% and 30%, respectively.

 

Significant outperformance over a 3-month period is not by itself a reason to shy away from an investment. However, when an investment theme becomes mainstream, it often means much of the outperformance has already occurred. Those who invest after something seems logical, are often too late. The hard part is measuring how “mainstream” something has become. One approach is to look at Google search data for the term “Inflation”. In the first two weeks of March, there have already been twice as many searches for the term inflation than any month since 2004 (see below).  

 

Zoom Communications and Moderna both experienced enormous growth over the last two years and both stocks were among the top performers in 2020 and 2021. The number of Google searches for both “Zoom” and “Moderna” spiked and have since declined as the pandemic subsided and the economy reopened. Today, both stocks are down more than 70% from their all-time highs reached during the pandemic.

 

Today, all attention is on the price of crude oil and gas as both are significantly impacted by the war in Ukraine. Due to the level of news coverage surrounding the invasion, energy has also become an obvious investment theme. After all, much of the developed world placed sanctions against Russia which produces roughly 10% of global oil supply. In the immediate days following the invasion the price of crude oil jumped 44% (from $90 to $130) but have since given back much of those gains (from $130 to $102).

Whether it’s energy stocks that benefit from a short-term spike in crude prices, or Zoom and Moderna that benefitted from the pandemic, we believe investors should be skeptical of any investment that seems too obvious. Rather than investing based on headlines, the focus should be on investing within a disciplined process that can generate long-term returns while helping manage risks. Building such a process is much more difficult than simply turning on the news, but great things don’t come easy.

 



T I P   O F   T H E   W E E K

 


What do your children know about money? There’s never a wrong time to talk to your children about its value and impact.

_____________________________________________________________________________________

THE WEEK AHEAD: KEY ECONOMIC DATA

Tuesday: Producer Price Index.

Wednesday: Retail Sales. Federal Open Market Committee (FOMC) Announcement.

Thursday: Housing Starts. Jobless Claims. Industrial Production.

Friday: Existing Home Sales. Index of Leading Economic Indicators.

Source: Econoday, March 11, 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: Coupa Software, Inc. (COUP).

Thursday: FedEx Corporation (FDX), Dollar General Corporation (DG).

Source: Zacks, March 11, 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.

_____________________________________________________________________________________

Q U O T E   O F   T H E   W E E K

 

The strongest of all warriors are these two — Time and Patience

LEO TOLSTOY

_____________________________________________________________________________________

 

_____________________________________________________________________________________

 

T H E   W E E K L Y   R I D D L E

You are at sea, it is mid-July, and your ship has reached a unique spot on earth. If you sail north, it will be summer; if you sail south, it will be winter. If you sail east, it will be Friday, but if you sail west, it will be Saturday. Precisely where in the world are you? (Hint: your ship is in the Pacific Ocean, near the island nation of Kiribati.)

LAST WEEK’S RIDDLE: There is a word (four letters long) that begins with the letter I. If you put the letter A at the front of this four-letter word, it becomes a five-letter word which is pronounced exactly the same. Name both words?

ANSWER: Isle and Aisle.

_____________________________________________________________________________________

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.Any reference to the performance of an index 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. 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.This report may contain certain forward-looking statements. Such statements are not guarantees of future performance and are subject to certain risks, uncertainties and assumptions that are difficult to predict. SteelPeak Wealth’s investments could differ materially, and an investor’s returns could differ materially and adversely, from those expressed or implied in any forward-looking statements as a result of various factors.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.
This content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG is not affiliated with the named representative, financial professional, Registered Investment Advisor, Broker-Dealer, nor state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and they should not be considered a solicitation for the purchase or sale of any security.
Copyright 2022 FMG Suite.
CITATIONS:
1. The Wall Street Journal, March 11, 2022
2. The Wall Street Journal, March 11, 2022
3. The Wall Street Journal, March 11, 2022
4. The Wall Street Journal, March 10, 2022

Share