Hi everyone — and a very warm welcome to the nearly +1,100 new subscribers this month. We try our best to compose three or more pieces of content every week — but sometimes we get behind. Your continued patience is very much appreciated!

Let’s talk macroeconomics, the stock market, as well as a few companies that have caught my eye recently.

⚡️ Consumer Price Index

CPI data for the month of September was released last week. It was higher than expected — causing the stock market to violently trade down, then back up again.

Core CPI in September was reported to be 6.6% — a new 40-year high.

We were also given a glimpse into the Fed’s mindset when the Minutes of the FOMC meeting in late-September were released. This was our largest takeaway —

The Federal Reserve is trying to raise unemployment. When accomplished, demand should fall — as should inflation.

Demand destruction is the name of the game. Unfortunately for the Fed, the only way they’re able to negatively impact demand is by raising interest rates — making it harder for people and businesses to borrow money.

Investors today are presented with a very hard challenge — navigating a Fed-induced recession while inflation is running rampant. I’ll be the first to admit that I’ve never experienced anything like this, nor do I have a silver bullet.

Given this reality, it sometimes feels like we’re asking ourselves not “How can I make money in the stock market?” but instead, “How can I preserve my money while nearly every asset class seems to be plummeting in value?”

Underlying Business

With that being said, I think it’s important to reflect upon an exert from Amazon’s 2000 Letter to Shareholders —

“Ouch. It’s been a brutal year for many in the capital markets and certainly for Amazon.com shareholders. As of this writing, our shares are down more than 80% from when I wrote you last year.
Nevertheless, by almost any measure, Amazon.com the company is in a stronger position now than at any time in its past.”

Jeff Bezos then went on to list a handful of key performance indicators for his business — things like operating expenses as a percent of sales, average spend per customer, and total customers served.

Despite Amazon’s stock price having traded down -80%, their underlying fundamentals were moving up and to the right.

We’ve all seen a similar chart to the one below — displaying the points of maximum financial risk and opportunity. I have a general idea as to where the stock market is in this chart — but this location becomes increasingly more obvious for single stocks.

Emotional Investing | Weekly Stock Market Viewpoint 2/5/21 | Ally

Rate of Return by Austin Hankwitz

🤔 Are These Companies Undervalued?

Comments on this post are for paid subscribers