š Week in Review: 10/9/22
Your checklist for a Fed pivot, considering if the US blew up the Nordstream pipeline, European energy updates, the Unemployment Rate must rise, & our terrifying Debt Bubble.
Weāre not doing a victory lap just yet.
But dang did we try to warn all of our readers about what was coming. Letās look back at what we wrote last week:
A lot of funds and money managers have gotten wrecked this year. They have clients and constituents that pay a pretty penny for capital preservation. We think a little bear market rally is on deck soon ā which will mostly be used as institutional exit opportunities before a bigger collapse to the downside.
Youāve seen all the things weāve written since the end of last year. You know we havenāt hit the bottom yet. If JPMorgan CEO Jamie Dimon is saying āsomething worseā than a recession may be coming ā you shouldnāt have too much comfort in this market.
And for the recordā¦ when we say āa bigger collapseā ā we arenāt talking about this -7.4% drop over the last month in the markets. We are talking about the S&P 500 ETF (SPY) approaching the levels of 330, 320, or possibly lower.
Nonsense from People Yelling for a Fed Pivot:
So why the weak market? What makes you think that more downside lies ahead?
Weāve shared this post numerous times because itās just that important. Back in April, we stated that you should not fight the Fed. That means not piling into stocks until Jerome Powell and the FOMC see the things that would require a pivot. Speculation on the Fed shifting from hawkish to dovish and stocks being short-term oversold led to a small rally to start the week. These types of rallies donāt have two legs to stand on.
What are those things needed for the Fed to truly pivot?
Below Average Growth
Rise in Unemployment
Inflation Peaked
Quick Checklist:
1ļøā£ Below Average Growth ā”ļø not yet.
2ļøā£ Rise in Unemployment ā”ļø nope.
The need for a rise in unemployment is described in these posts: One | Two | Three | Four
3ļøā£ Inflation Cooling ā”ļø no solidified trend change.
It also doesnāt help that we drained our oil reserves to artificially bring down inflation and now OPEC+ has cut oil supply by 2 million barrels per day in order to pin the US in a corner. Russian leaders are applauding the Saudis. Weāll find out more this week, as the Consumer Price Index (CPI) results for September come out on Thursday morning. Weāll discuss this during tomorrowās Week Ahead post.
We expect gas prices to climb in the United States over the coming months, and so does the oil futures market.
Donāt Believe in Coincidences:
Before we move onā¦ one final note of interest coming out of the Rate of Return ~conspiracy archives~.
Just as it was a ācoincidenceā that Fed officials were āavoiding conflicts of interestā with their stock sales at the end of 2021ā¦.
ā¦ we also view the timing of Ray Dalio stepping down as a bit too perfect.
Dalio is the leader of the largest hedge fund in the world, and we genuinely believe he is thinking āthings are going to get incredibly ugly, nowās the time to step away!ā Just food for thoughtā¦ we could be completely wrong.
Week in Review ā Too Long, Didnāt Read:
Conagra Brands is shaping up to be a wonderful income-focused investment opportunity, Mexican beer is growing in popularity, and McCormick has a $100M task at hand. The United States might have sabotaged the Nord Stream Pipeline, Google introduced a competitor to the Apple Watch, Costco is crushing it, the labor market needs to continue to cool down, auto sales are going to continue to see volatility, and weāre in a consumer credit bubble.
Key Earnings Announcements:
We analyze earnings report updates from major players in the Consumer Goods space.