From the desks of Stanley Katz & Lauren Madera
STAY SAFE AND HEALTHY!
Everything—gas, food, shipping, apparel—is going up in price except the US stock market. On Friday, inflation posted its largest annualized increase since 1981. And the US indices reacted sharply to the downside for the week (i.e., DJIA: -4.58%, S&P 500: -5.06%, Nasdaq: -5.60%). In fact, the DJIA has been lower 10 of the past 11 weeks, and the S&P 500 has been lower 9 of the past 11 weeks. We have hit at or near correction territory with returns year to date down -13.61%, -18.16% and -27.52%, respectively. With the war in Ukraine raging on, food and energy prices do not appear to be backing off anytime soon. As a side note, the Federal Reserve is scheduled to meet this week and will more than likely announce another Fed Funds rate increase. Increased interest rates could slow demand, but it certainly can’t fix the supply issues. Click the Schwab commentary “Which Sectors Might Benefit from Rising Rates.”
No question, corporate earnings estimates were optimistic heading into this year. In actuality, posted earnings have still grown but at a slower pace because revenues have not increased enough to keep up with cost pressures. As a consequence, Price / Earnings ratios have receded to ~16X—down from over 21X a year ago. J.P. Morgan Asset Management’s short epistle, “Are you worried about an earnings recession?” does a great job of describing where things currently stand.
Below are links to a number of third-party research reports that we have read and analyzed over the past week. We hope you will find the information interesting, useful, and worthwhile.
J.P. Morgan Asset Management:
Goldman Sachs Asset Management:
Stanley Katz & Lauren Madera, Financial Advisors
ClientFirst Financial Strategies, Inc.
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