The Investing Week Ahead: 5/9/22
Stocks are likely to go lower, Musk joins vehicle leaders for a summit, and the most important inflation print in recent memory.
Happy (delayed) Mother’s Day!
If you’re a mother receiving this email — cheers to you. If you’ve got a mother to text or call — do it. There is no more difficult job!
Remember this chart?
For those unaware — The Buffett Indicator is the ratio of total US stock market value to GDP.
According to the site: “By our calculation that is currently 36% (or about 1.2 standard deviations) above the historical average, suggesting that the market is Overvalued. These are near historical, all-time highs. However, with interest rates at historic lows, there is reason to suspect that the adage "this time is different" may hold true.”
It’s important to note that Buffet has called the ratio “the best single measure of where valuations stand at any given moment.” Since then, he’s walked back those comments — not endorsing any single measure as perfect over time. However, this is still a great gauge of seeing when the market isn’t quite operating properly.
The main point? Stocks can go lower. It’s easy to look at a 1-year chart of the S&P 500 and see that it’s down -4%. How about flipping to the 5-year chart? It’s up +69%.
Stocks can, and likely will, go lower. More on that here.
The Investing Week Ahead - Too Long, Didn’t Read:
⚡ Earnings from Affirm, Builders FirstSource, Coinbase, Roblox, and Unity.
⚡ Financial Times’ Car Summit brings together the world’s A-List vehicle execs.
⚡ The market’s short-term hope weighs in the balance of this week’s CPI reading.
Key Earnings Announcements:
A generally weak earnings period — highlights by a major holding of mine and tech newcomers.
Monday (5/9): AMC, BioNTech, Lemonade, Novavax, Palantir, Plug Power, Tyson, Upstart
Tuesday (5/10): Builders FirstSource, Coinbase, Peloton, Roblox, SoFi, Sysco, The Trade Desk, Unity
Wednesday (5/11): Beyond Meat, Bumble, Coupang, Disney, Dutch Bros, Fiverr, Rivian, Sonos, Yeti
Thursday (5/12): Affirm, Aurora, Bakkt, Brookfield Asset Mgmt, US Foods
What we’re watching:
Supply & Demand: A couple of times this year (January | February), I’ve mentioned Builders FirstSource (BLDR) as an interesting play because it’s a publicly traded company that sells the raw materials to home builders. This market crash is very different from 2008, because this time around there’s a supply shortage of single-family and multi-family homes. BLDR currently makes up 6% of my portfolio, so we’ll be watching very closely for updates and will report back at the end of the week.
Big Tech JV Squad: This week, we see the results of the ‘JV’ team for Big Tech. We’re certainly not dealing with Amazon or Google — but Coinbase, Roblox, The Trade Desk, and Unity are all worth $15-$25 billion and have thousands of employees. The performance of these companies could determine if the market is approaching a ‘bottom’ area or if calls for the S&P to fall another -15% will reign true.
Coinbase’s NFT Blunder? Coinbase launched its NFT marketplace in mid-April — and the results have been less than stellar. Since April 20th, OpenSea had ~$3.5 billion in NFT volume across ~350,000 users. During the same time, Coinbase had ~$700K across ~1,300 users. Let’s see what CEO Brian Armstrong has to say about the surprising letdown.
Investor Events:
Analyst and Investor Days are becoming increasingly important to give shareholders hope during turbulent market activity, and Elon Musk steps back into the spotlight.
Monday (5/9): Western Digital Corp. Investor Day
Tuesday (5/10): Dish Network Analyst Day, Elon Musk Interview at FT Car Summit, Fortinet Investor Day
Wednesday (5/11): Kohl’s Annual Meeting, Lucid Group CEO Speaks at FT Car Summit, Under Armour Annual Meeting
Thursday (5/12): BetMGM Virtual Business Update, Fastly Investor Day
All Week: Bank of America 2022 Healthcare Conference, Financial Times Future of the Car Summit, Goldman Sachs Industrials & Materials Conference
What we’re watching:
EV Spotlight Remains Bright: If Elon Musk agrees to an interview at a conference, it’s typically something that can impact the market. Joining Musk will be the C-Suiters from Volkswagen, Mercedes-Benz, Toyota, Volvo, Ford, Nissan, and more. Ever seen Batman, Dune, Dunkirk, Interstellar, or Pirates of the Caribbean? Oddly enough Hans Zimmer — the composer of those movies’ soundtracks — will be delivering a keynote alongside these vehicle giants.
Under Armour Needs New Shine: While I’m not interested in becoming a shareholder, it’ll be interesting to see what UA execs have to say about recent company performance. Under Armour just reported an unexpected loss, sales well below estimates, and horrendous guidance. The stock has fallen -30.5% in the last week.
Major Economic Updates:
New CPI print is coming — the Federal Reserve prays that the ‘Manages Inflation’ role (depicted below) is actually working.
Monday (5/9): Inflation Projections (1-Year, 3-Year)
Tuesday (5/10): Small Business Index, Speeches from Three Fed Presidents
Wednesday (5/11): Consumer Price Index, Federal Budget
Thursday (5/12): Producer Price Index
Friday (5/13): Speeches from Two Fed Presidents
What we’re watching:
Has Inflation Peaked? This could be the most important inflation reading of the past year. As mentioned in yesterday’s Week in Review — the Fed is very reliant on government data to determine its path moving forward. If the CPI begins to marginally improve, there could be heightened spirits across the board. If not, look out below.
Fed Sentiment: It’s important to remember that the Federal Reserve has 12 different banks, all with different leadership and viewpoints and the macro economy. Market-moving quotes can come not only from Fed Chair Jerome Powell — but also from any of the other bank Presidents that lean more dovish or hawkish. At least five speeches are expected this week, giving the opportunity for deeper insight into what the whole committee is thinking.
Events-Driven Winners:
What specific events are moving stocks the most?
Our friends at LevelFields scrub through thousands of data points each week to determine how events impact stock prices.
It’s going to be incredibly interesting to see what takes places with both ‘Big Oil’ companies and stock buyback rules moving forward.
A few weeks ago, the market discovered that ExxonMobil has tripled its buyback cadence and Chevron has posted its highest profits since 2012. Around the same time, Congress has been pressing the leadership of energy companies to determine if any price gauging malpractice is taking place. If Congress sets some sort of buyback restrictions in place for publicly traded companies — not just oil leaders — it could negatively impact the stock market.
If you find these Week Ahead posts helpful, please consider sharing with a friend! Have a great start to your week!
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Disclaimer: This is not financial advice or recommendation for any investment. The content is for informational purposes only, you should not construe any such information or other material as legal, tax, investment, financial, or other advice.
Hey Austin, are you going to put out any content in light of the recent sell off in the stock and crypto markets? I bet there are many subscribers interested in your take at the moment.