It was another volatile week in the market this week that started with 3 days of selling and ended with a huge rebound, however the S&P 500 still ended down -0.9% with the NASDAQ faring worse down -1.6% and the DOW doing the best with -0.2%.
It felt like the market had started the week scared on Monday and Tuesday as we waited for the latest CPI reading to come out on Wednesday. In addition to that, Spain’s Prime Minister stated that Spain is likely to have lower than expected growth in the near future, which sparked some global growth concerns in the market early in the week. Shell CEO also warned that Europe is going to have an energy crunch in this coming winter and may need to ration energy. There were also reports of Chinese citizens boycotting their mortgage payments. The world’s economic health is beginning to show signs of tears.
When Wednesday came, the June CPI report was released which had shown a 1.3% month-over-month increase that lifted the year-over-year growth rate to 9.1%, pretty far off from the 0.3% decrease that was expected. A level that hasn’t been seen for 41 years. Thursday then followed with the release of the PPI report which showed a similar trend. It increased 1.1% MoM which put the YoY rate to 11.3%.
This week also kicked off earnings season with a couple of disappointing reports from major banks Morgan Stanley and JPMorgan Chase.
After all this, stocks finished this down week on a happy note powered by the University of Michigan Consumer Sentiment Survey which showed an increase in sentiment, in line with foreceats, due to improving inflation expectations as a result of the recent drop in energy prices. On Thursday, WTI crude fell to new low level not seen since February but bounced back 8.2% higher to finish Friday. If energy continues to push higher through this rebound, the positive push in sentiment we saw could easily be reversed.
Next week, potentially impactful items on the economic calendar include the UKs CPI reading which is forecasted to increase 0.2%, Japan’s interest rate decision will be extremely impactful if the stalwart wavers and moves up rates, US good orders, and the next FOMC meeting where rates are expected to move up 0.75%. We also have a handful of earnings from mega caps like Apple, Microsoft, Google, Amazon, Tesla, and a handful of oil companies that may affect the market.
In my opinion, it looks like the market is getting ready for a move down next week given the risky economic events and important earnings call which are more likely to disappoint than excite.
However, regardless of if the market is up or down, my approach to investing stays the same. We buy strong dividend payers with healthy balance sheets and solid businesses. We did that this week with some strategic buys in $BAC and $MMM, read the portfolio update here. Keep your eyes open for good opportunities to add to those kinds of companies and stay patient. Thank you for reading!