In today’s Steady Investor, we cover current events that we believe are shifting the current state of the market, such as:
Stagflation Fears are Back – Or to state it more accurately for 2022, stagflation fears never left. For much of the new year, market prognosticators have been warning that the global economy was setting up for a year of rising inflation and slowing, and eventually negative, growth. Skeptics seemed to be vindicated in Q1 when the U.S. economy posted -1.5% GDP growth and record year-over-year inflation rates, and the warnings of stagflation have persisted since. A ‘major warning’ came last week from the World Bank, which significantly lowered its global GDP forecast and warned of several years of high inflation and slow to negative growth. Comparisons to the 1970s period of stagflation abound. But there was one glaring issue with this gloomy forecast – the World Bank still expects the global economy to grow by 2.9% in 2022. The alarm bells were ringing because the bank’s original forecast was for 5.7% growth, but few pointed out that the expectation is still for sturdy growth for the balance of the year and next. For investors, these drastically lowered expectations can ultimately be a good thing – if everyone fears the worst, but the economy does even a tiny bit better than expected, that is sometimes all stocks need to stage a rally.1
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Will the Market Recover Anytime Soon?
We are currently witnessing a very volatile market, and in times like these, investors may emotionally attach themselves to news and headlines that affect their financial decision-making process. The market has always fully recovered, but what about this time?
To help you get the answer to this question and more, we’ve put together a free investing playbook with insights and guidance to help you seek success when investing through these unprecedented times. If you have $500,000 or more to invest, get our free investing playbook today.
Download – The Black Swan Investing Playbook2
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No Love for the U.S. Economy– For 12 months straight, the U.S. economy has added a robust 400,000 jobs per month, the strongest period of job gains dating back to 1939. Wages are higher and workers hold many of the chips, with the unemployment rate sitting near a historic low of 3.6%. But few Americans are happy about it. In a recent Wall Street Journal-NORC poll, conducted with the University of Chicago, a staggering 83% of respondents said the economy was in a poor or ‘not so good’ state. 35% of respondents reported being unhappy with their financial situation, which marks the highest level of dissatisfaction since 1972 – the first year of the survey. According to the poll’s findings, people are more unhappy today than they were in the aftermath of the 2008 Global Financial Crisis when the jobless rate was double-digit and millions of people lost their homes. If anything, the survey seems to underscore just how much Americans dislike higher gas and food prices, because thinking the economy is worse off today than it was in 2008 and 2009 is simply not objectively correct. Much like stagflation fears, this survey shows just how much sentiment has turned negative even when there are many strong economic fundamentals – a bullish setup, in our view.3
Big Retailers are Stuck with The Wrong Inventory – Major U.S. retailers like Target, Walmart, and Macy’s have an inventory problem. Over the course of the last year, these companies adjusted to shifting consumer behavior, which saw Americans spending more on home furnishings, electronics, and casual clothes. The pandemic fueled a work-from-home movement that was also accompanied by a rush to buy homes and remodel them, which played well for big purchases of the aforementioned goods. But because of some miscalculation on retailers’ parts, coupled with supply chain snags that are seeing many of these goods being delivered on delay, companies like Target and Walmart are stuck with inventory that consumers are not necessarily demanding as much. Inventory in the April quarter rose by 43%, and has saddled retailers with goods that are likely past the ideal selling window. That has led to earnings adjustments to the downside for many of the key players, with many companies indicating they will be marking down many goods in the current quarter to try and clear inventory. That likely means smaller operating margins for retail players, but could also mean some bargain buys for consumers in the coming weeks and months.4
Events, such as the ones listed above, can easily cause uncertainty when trying to plan your financial future. While it’s difficult to remain calm, it’s also important to take actions right now that have the greatest potential to define your financial future.
That’s why we have put together a free investing playbook5 with insights and guidance to help you seek success when investing through these unprecedented times. If you have $500,000 or more to invest, get our free investing playbook today. You’ll learn about seven time-tested guidelines to help you seek investing success.
Disclosure